Financial Accounting Standards Research Initiative

We have seen the articles linking fair value accounting to financial and macroeconomic instability.  Now comes an article in BusinessWeek arguing that expensing of internally-generated intangibles leads firms to look first to R&D and marketing when times get tough.  Moreover, they argue that this effect distorts GDP measures, because cost-cutting show increased income due to [...] Read more > >

In their joint meeting in Norwalk, Connecticut this past week, the IASB and FASB reached the tentative conclusion that lessors will no longer derecognize leased assets. Instead, lessors will recognize a receivable and a performance obligation with revenue being recognized over time. Some think this approach is more consistent with the proposed new revenue recognition [...] Read more > >

I have a comment and a question for all of you. Comment, I think the credit to APIC on a non-qualified employee stock option plan is crazy.  I understand the logic that the reason why we are crediting APIC is because our GAAP compensation expense is less than the tax deduction, so to credit ITexpense on [...] Read more > >

I just read the abstract of a forthcoming paper (Kvaal and Nobes 2010) that compares the accounting policies of blue chip companies in the largest five stock markets that use IFRS. By comparing the policy disclosures in annual reports, the authors find “significant evidence that pre-IFRS national practice continues where this is allowed within IFRS.”  [...] Read more > >

We had a very interesting discussion with Gilles Hilary and Rodrigo Verdi on their paper linking better financial reporting quality to less overinvestment among firms with lots of cash on hand and less underinvestment among firms with lots of leverage.  It sparked a number of questions, so of which I recount here: What specific aspects of [...] Read more > >

I learned today of a consortium of financial industry groups called “The Financial Instruments Reporting and Convergence Alliance” (FIRCA).  The groups who joined together to form FIRCA include: American Council of Life Insurers, Commercial Mortgage Securities Association, Council of Federal Home Loan Banks, Group of North American Insurance Enterprises, Mortgage Bankers Association, Property Casualty Insurance [...] Read more > >

The accounting department here at UT has an outside advisory council.  We had a semi-annual meeting last Friday.  We happened to be talking about the new FASB codification system.  One advisor mentioned that the consequence they have seen is companies now FORGOING any mention of any standard in their footnotes.  You know, we are used [...] Read more > >

On Wednesday, Oct 28th, 11 am ET, we will be joined by Gilles Hilary (HEC Paris) and Rodrigo Verdi (MIT). They will be discussing their paper, entitled “How Does Financial Reporting Quality Relate to Investment Efficiency?” The paper is co-authored with Gary Biddle at the University of Hong Kong. The abstract of their paper reads: “Prior evidence [...] Read more > >

I’ve been doing financial reporting in the classroom for a long time (20 years).  I always am unsure where to find SEC rules.  Well, my confusion is not unwarranted. My colleague here at Texas, John Robinson, is doing a faculty fellowship there this term.  He just came back to talk to us about it here [...] Read more > >

We had a great discussion about Reg FD and foreign filers on Tuesday.  If you were not able to attend, I encourage you to view the archive.  When you do so, you will notice several text comments from me (Accounting Footman) that may at first seem very critical of the study.  I want to clarify [...] Read more > >

Read this. Read more > >

Someone passed along an email indicating this blog post, titled Big Four Firms Provide Excellent Resources on IFRS Conversion.  Now, not only do I have a wealth of links to useful information, but I have a new addition to our blogroll:  The Big Four Blog, whose tag is “Big Four news, events, happenings and opinions [...] Read more > >

I got an email alerting me to some recent PriceWaterhouseCoopers publications.  Their Transaction Services group appears to be writing a series of papers on Financial Reporting in a Troubled Economy.  One report in particular caught my eye – “How the Economic Slowdown Leads to Added Financial Reporting Complexities.”  An interesting quote is “While financial reporting [...] Read more > >

Auditing, not financial reporting, but still worth a close look: PCAOB Announces Ambitious Agenda; May Be Time to ‘Dial Up’ on Fraud, Silvers Says Read more > >

On Tuesday, Oct 20th, 4 pm ET, we will be joined by Bin Ke (Penn State University).  Bin will be discussing his recent paper, entitled “Why do cross-listed firms voluntarily adopt Regulation Fair Disclosure?” The paper is co-authored with Michael Crawley and Yong Yu, both of whom are from the University of Texas at Austin. The abstract [...] Read more > >

Did you all see the article written by Jonathan Weil.  It’s entitled “Five people who stayed clean in Banking’s Bilge.”  He mentions Tom Linsmeier and Marc Siegel of the FASB.  It’s a good read .. check it out.. http://www.bloomberg.com/apps/news?pid=20601039&sid=asF03z299rGY Read more > >

Christian Leuz emailed me with a link to his recent paper with Christian Laux, entitled “Did Fair-Value Accounting Contribute to the Financial Crisis.”  He thought it might be of interest to our readership, and having spent some time with the paper this morning, he is right. In short, the paper’s answer is “no,”  which is [...] Read more > >

The Accounting Onion (longtime member of our blogroll) has a very short survey on people’s views about international convergence of accounting standards to IFRS.  At only 12 questions long, it only takes a few minutes of your time.  I am sure your input would be valued. Read more > >

I was asked to write two chapters for a Wiley book called Behavioral Finance, and for some reason I said yes.  Neither chapter is a typical review paper.  Behavioral vs. Traditional Finance will be Chapter 2 of the book, and sets the stage by viewing the conflict between the subfields in light of the philosophy [...] Read more > >

It is the rare academic article that explicitly considers the objective function of the regulator.  William Bratton is a law professor from Georgetown who takes exactly this focus, and will joins us at the FASRI Roundtable on Wednesday, October 14th at 11am ET to lead us through the thicket of political pressures and machinations that [...] Read more > >

A student of mine brought to my attention an article in the Wall Street Journal September 24, 2009, “Investors Should Focus on Apple’s Core.”  In that article, Martin Peers points out that existing guidance for firms who have products that combine hardware and software, like Apple’s iPhone, required firms to obtain specific evidence about the [...] Read more > >

I’ve heard some people express the opinion that the FASB’s recent emphasis on an asset-liability approach is just a thinly veiled attempt to move financial reporting more in the direction of fair values. Ignoring the fact that the primacy of assets and liabilities is as old as the conceptual framework itself, I think recent evidence [...] Read more > >

By now, most academics with an interest in standard setting are aware that the FASB and IASB view assets and liabilities as ‘primary’ elements of financial statements, from which income is derived.  However, it is all too easy to see primacy as indicating importance, which I suspect Kothari, Ramanna and Skinner have done in their [...] Read more > >

Once upon a time, almost all accounting research used armchair reasoning to support claims about what Generally Accepted Accounting Principles should look like.  But in 1968, Ball and Brown published a paper that started a trend toward systematic collection of evidence on how financial information is used.  I always thought that the ultimate goal  was [...] Read more > >

The JAE Conference closed with a contentious discussion of Kothari, Ramanna and Skinner’s paper “What Should GAAP Look Like?”  I have a lot to say about the substance of this and other papers, but that will have to wait for later posts.  (I will probably be posting about the conference for much of the coming [...] Read more > >

Just in case anyone is interested, I just received the following announcement from the University of Michigan.  If you have Second Life installed, you can attend by clicking this link. Today  .. Oct 2nd at Noon ET -  Join Perplexity Peccable for a most interesting and relevant discussion event ::: on how to use Second Life [...] Read more > >

Reading Kothari, Ramanna and Skinner’s answer to the question “What Should GAAP Look Like?” makes me want to get a better handle on the different perspectives academics are bringing to their criticism of accounting standards and the standard-setting process.  This will probably be the first of several posts, and I want to start with the [...] Read more > >

"Libby Boxes" Revenue recognition is one of FASRI’s key target areas for research over the coming year.   We are going to take a big step forward on Tuesday, October 6th, 4pm by laying out some possible approaches to research studies on RevRec.  We will be structuring our discussion around the key independent variables that researchers might [...] Read more > >