scholarly journals A Meta Analysis of Materiality Studies

2022 ◽  
Vol 11 (1) ◽  
pp. 1
Author(s):  
David E. Vance
Keyword(s):  
Meta Analysis ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Certified Public Accountants ◽  
Net Income ◽  
Financial Accounting Standards Board ◽  
The Public ◽  
Public Company ◽  
Significant Difference ◽  
The Supreme Court

The Supreme Court and the Public Company Accounting Oversite Board (PCAOB) has said that an amount is material if there is a substantial likelihood it will influence a reasonable investor’s judgment. The American Institute of Certified Public Accountants (AICPA) has said that an amount is material if there is a substantial likelihood it will influence a reasonable user’s judgment. The Financial Accounting Standards Board (FASB) has refused to define materiality. The Securities and Exchange Commission (SEC) has said that qualitative factors can make even small amounts material. Reasonable implies a consensus of opinion. This article is a meta-analysis of 31,155 materiality decisions made by 335 cohorts in 48 studies with the objective of defining what is reasonable. A cohort is a group of like individuals faced with a common materiality decision. Materiality in this study is measured as a percentage of net income. The mean threshold of materiality is 7.84% and the median is 6.81%. Both thresholds are substantially higher than the often-discussed threshold of 5.0%. A quarter of the participants in these studies set the threshold of materiality at 11.90% and the threshold for a statistically significant difference from the consensus is 17.51%. Ultimately, materiality will be decided through civil and criminal litigation. Finders of fact, usually jurors, will be asked to determine what a reasonable investor would conclude. Few jurors have the training and experience of investors, so without context, they can only guess what a reasonable investor would conclude. This study provides that context.

scholarly journals Materialidade aplicada a relatórios de sustentabilidade assegurados: uma abordagem crítica à luz da pesquisa contábil

2019 ◽  
pp. 50
Author(s):  
Estephanye Paganotti Da Cunha ◽  
Ivone Fiorin ◽  
Renato Loureiro Faller
Keyword(s):  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
International Accounting ◽  
International Accounting Standards ◽  
Financial Accounting Standards Board ◽  
Public Company ◽  
International Accounting Standards Board

Este ensaio teórico aborda lacunas quanto à pesquisa contábil ambiental e as limitações apresentadas por relatórios socioambientais. Indagam-se alguns pontos ainda não respondidos sobre sustentabilidade, como o fato de o assunto ser pouco pesquisado no Brasil. Isso posto, observa-se em foco o que é chamado na literatura de Ciência da Sustentabilidade, uma linha de conhecimento multidisciplinar que envolve diversas áreas de conhecimento, permitindo a experimentação e testes, em vez de apenas fazer uma seleção de ciência específica para encontrar a solução mais acertada. A materialidade contábil no âmbito da pesquisa ambiental, tendo em vista as óticas dos organismos mundiais, tais como, Financial Accounting Standards Board (Ffasb), Securities And Exchange Commission (Sec), International Accounting Standards Board (Iasb), Public Company Accounting Oversight Board (PCAOB), que, apesar de ter como ponto positivo ser flexível, apresenta, ao mesmo tempo, como ponto negativo, essa mesma flexibilidade, que permite aos relatórios ambientais maior subjetividade e baixa objetividade. A referida flexibilidade pode fazer com que a empresa demonstre o que foi considerado bom, omitindo o que a instituição considere ruim na sua visão. Sendo assim, questionamentos são levantados sobre o escopo da Ciência da Sustentabilidade, da efetividade dos relatórios socioambientais apresentados e da clareza das demonstrações socioambientais, mediante a presença, ou não, de dispositivos legais.

Viewing the 1996 FAF Restructuring as Policy Making without a Formal Due Process

2002 ◽  
Vol 16 (3) ◽  
pp. 199-214 ◽  
Author(s):  
Paul B. W. Miller
Keyword(s):  
Financial Reporting ◽  
Policy Making ◽  
Due Process ◽  
Accounting Standards ◽  
Sole Source ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Perceived Threat ◽  
Financial Accounting Standards Board ◽  
Public Accounting

In 1996, a major financial reporting controversy emerged, escalated, and was resolved without substantial exposure or a formal due process. Specifically, a committee of the Financial Executives Institute (FEI) sent a letter to the chair of the Financial Accounting Foundation (FAF) asserting that the Financial Accounting Standards Board (FASB) “process is broken and in need of substantive repair.” When Securities and Exchange Commission (SEC) Chair Arthur Levitt determined that neither FAF nor public accounting leaders were dealing with the FEI proposals to his satisfaction, he acted to defeat this perceived threat to FASB's independence, focusing on the composition of the FAF. In response, the FAF trustees resisted because they viewed his intervention as a threat to FASB's independence. When the trustees did not voluntarily change, Levitt proposed reconsidering Accounting Series Release No. 150, which designates FASB as the sole source of GAAP for SEC filings. Eventually, Levitt prevailed. This paper describes this intervention as a case of policy making without a formal due process and adds to the already weighty evidence that accounting standards are political.

scholarly journals A Note On The Reliability Of Accounting Lobbying Studies

2011 ◽  
Vol 7 (4) ◽  
pp. 67
Author(s):  
Dale Buckmaster ◽  
David Durkee ◽  
Frederic M. Stiner
Keyword(s):  
Content Analysis ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Rater Reliability ◽  
Extreme Caution ◽  
The Public ◽  
Content Analyses ◽  
Public Record

Studies that are based on content analyses of portions of the Financial Accounting Standards Board Public Record have appeared regularly in accounting and business literature since 1978. Inter-rater reliability is a crucial determinant of the validity of content analyses, yet none of the studies based on content analysis of the Public Record report any measure of inter-rater reliability. This study provides some evidence of the degree of inter-rater reliability of these studies. Krippendorffs coefficient of agreement, a measure of inter-rater reliability is derived for each of eight issues from four raters performing a content analysis of respondent letters in the Public Record volume, Exposure Draft: Accounting for Certain Acquisitions of Banking or Thrift Institutions. In general, the coefficients indicated that extreme caution should be exercised in making inferences from studies based on content analyses of the Financial Accounting Standards Board Public Record.

Going Concern Designations and GAAP versus Non-GAAP Earnings Metrics

2012 ◽  
Vol 28 (1) ◽  
pp. 77-92 ◽  
Author(s):  
James L. Bierstaker ◽  
Thomas F. Monahan ◽  
Michael F. Peters
Keyword(s):  
Stock Price ◽  
Potential Role ◽  
Cash Flows ◽  
Financial Accounting ◽  
Master's Level ◽  
Financial Accounting Standards Board ◽  
Generally Accepted Accounting Principles ◽  
Going Concern ◽  
Public Company ◽  
Auditor Reporting

ABSTRACT: Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the “Street.” Based on the facts of an actual company and utilizing the financial information drawn from this company's 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards, (2) about the potential role of non-GAAP earnings in this decision—especially as a predictor of future cash flows, and (3) other issues associated with non-GAAP earnings. This topic is important, as auditors are frequently auditing companies that release non-GAAP earnings and/or have going concern issues. This case can be used in Intermediate and Auditing classes, as well as master's-level courses.

scholarly journals Environmental Accounting Disclosure in ASEAN Countries

2017 ◽  
Vol 7 (1) ◽  
pp. 107
Author(s):  
Haqi Fadilah
Keyword(s):  
The Philippines ◽  
Environmental Accounting ◽  
Financial Accounting ◽  
Accounting Disclosure ◽  
The Public ◽  
Significant Difference ◽  
The Difference ◽  
Asean Countries ◽  
Operational Activities ◽  
Impact Problems

This study aims to determine whether there is a difference between the scores of country-based environmental accounting disclosure (in the ASEAN region) and industrybased environmental accounting disclosure (in real estate, forest/agriculture, consumer goods, hospitals, energy, and chemicals/pharmaceuticals). The research method used is One-Way ANOVA difference test. The results show that there is a difference in the scores of country-based environmental accounting disclosure. The difference is between Indonesia and Singapore and between Indonesia and the Philippines. Furthermore, there is no significant difference in the scores of industry-based environmental accounting disclosure, as well as when viewed from each of ASEAN countries. Each country needs to have more stringent regulations and policies to require each company to present the environmental accounting disclosure in the annual report or sustainability report as a form of corporate legitimacy to the public. In addition, there should be a revision of the nature of the environmental accounting disclosure in the financial accounting standards, from voluntary to mandatory. It is intended that every company of various types of industries really pay attention to the environmental impact problems arising from its operational activities.

scholarly journals Accounting For OPEBs: Does Better Accounting Serve The Public Interest?

2011 ◽  
Vol 11 (3) ◽  
pp. 1 ◽  
Author(s):  
Timothy A. Pearson ◽  
Scott I. Jerris ◽  
Richard Brooks
Keyword(s):  
Health Care ◽  
Social Consequences ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Accounting Standard ◽  
Public Companies ◽  
The Public ◽  
Setting Process ◽  
Sfas 106 ◽  
Accounting Standard Setting

In 1992, the Financial Accounting Standards Board (FASB) issues Employers Accounting for Postretirement Benefits Other Than Pensions (SFAS 106). SFAS 106 requires public companies to account for postretirement benefits other than pensions (e.g., health care) on an accrual basis. While SFAS 106 is good accounting, it provides corporations with an excellent excuse to amend or terminate health care coverage for retirees. This paper discusses the economic and social consequences of SFAS 106 as well as the politics of the accounting standard setting process.

scholarly journals Accounting For Software Expenditures

1999 ◽  
Vol 3 (3) ◽  
pp. 33-46
Author(s):  
Linda R. Garceau ◽  
Randall Luecke ◽  
David Meeting
Keyword(s):  
Software Development ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Certified Public Accountants ◽  
Financial Accounting Standards Board ◽  
American Institute ◽  
Development Costs ◽  
Appropriate Treatment ◽  
Public Accountants

The Financial Accounting Standards Board and the American Institute of Certified Public Accountants have wrestled with the issue of the appropriate treatment for software development costs for many years. This article summarizes the professional pronouncements of the last 25 years that address this issue, identifying the business cir-cumstances when such costs should be capitalized and when they should be expensed.

US public auditing reforms may follow 2020

2020 ◽  
Keyword(s):  
Audit Quality ◽  
Securities And Exchange Commission ◽  
Fiscal Year ◽  
Donald Trump ◽  
Public Accounting ◽  
Content Type ◽  
The Public ◽  
Securities Law ◽  
Budget Proposal ◽  
Public Company

Subject US public accounting oversight and proposed reforms. Significance Earlier this month, President Donald Trump released his budget proposal for the 2021 fiscal year. Among the proposals is merging the Public Company Accounting Oversight Board (PCAOB) into the Securities and Exchange Commission (SEC) beginning in 2022. The move would further weaken US securities law and the accounting framework, which has steadily eroded in recent years. Impacts Shifting oversight over audit quality to the SEC would greatly reduce resources available for this function. House Democrats will be reluctant to give Trump legislative victories before November. Under Trump, the SEC will further shrink its enforcement activities; this process began before he became president.

A HISTORY OF POOLING OF INTERESTS ACCOUNTING FOR BUSINESS COMBINATIONS IN THE UNITED STATES

1991 ◽  
Vol 18 (2) ◽  
pp. 155-192 ◽  
Author(s):  
Frank R. Rayburn ◽  
Ollie S. Powers
Keyword(s):  
Accounting Standards ◽  
The United States ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Financial Accounting Standards Board ◽  
Business Combinations ◽  
Accounting Principles ◽  
History Of ◽  
Business Combination ◽  
The Subject

This paper traces the development of pooling of interests accounting for business combinations from 1945 to 1991. The history of the pooling concept is reviewed chronologically with particular emphasis on the events of 1969–1970 that were related to the most recent pronouncement on the subject, Accounting Principles Board (APB) Opinion No. 16. Early in its life (1974), the Financial Accounting Standards Board (FASB) placed a project on its agenda to reconsider pooling of interests accounting. That project was removed from the FASB's agenda in 1981. APB Opinion No. 16 has gone essentially unchanged as it relates to the accounting for a business combination as a pooling of interests. Resolution of implementation issues has been left largely to the Securities and Exchange Commission and the accounting profession. The FASB has a project on its agenda on Consolidations and Related Matters that may impact pooling of interests accounting. There also is some pressure for the FASB to revisit accounting for business combinations.

Financial Disclosure and Toxic Products: Encouraging Wall Street to Anticipate Product Risk and Exercise Precaution

2009 ◽  
Vol 19 (1) ◽  
pp. 31-58
Author(s):  
Sanford Lewis ◽  
Margaret Byrne
Keyword(s):  
Financial Crisis ◽  
Accounting Standards ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Financial Disclosure ◽  
Financial Accounting Standards Board ◽  
Wall Street ◽  
Financial Reports ◽  
Product Risk ◽  
Current Financial Crisis

Amidst discussion by policymakers about how regulators' failure to ensure disclosure of risks contributed to the current financial crisis, we assess how emerging product toxicity risks are addressed in companies' financial reports. Will corporations blindside investors with “the next asbestos?” Existing disclosures are found lacking in the specificity needed to forewarn of liabilities and reputational damage from the use of potentially harmful materials—from nanotechnologies, to asthmagens, to perfluorinated compounds. Improved standards could protect investors while also enhancing corporate incentives to use safer materials. Reforms by the Securities and Exchange Commission and the Financial Accounting Standards Board are recommended.

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