Financial Accounting Standards Research Initiative

To what extent do lenders or credit analysts care about lease renewal options? In the proposed lease accounting model, lessees will capitalize the longest lease term that is more likely than not to occur. This means that renewal periods that a lessee is not obligated to renew will be measured as part of the lease [...] Read more > >

On Saturday January 23, I will be moderating a panel discussion entitled, “Practice-Relevant Researchable Accounting Issues: Practitioners’ Views.”  The panelists are John Hepp, Partner with Grant Thornton, Bob Laux, Senior Director of Financial Accounting and Reporting at Microsoft Corporation, and Scott Taub, managing director of Financial Reporting Advisors and former Deputy Chief Accountant of the [...] Read more > >

Jim Leisenring’s remarks at yesterday’s roundtable were great.  In the portion related to the interaction of research and standard setting, he reminded us of two papers in Accounting Horizons on the interaction: “Academic accounting research and the standard setting process” by Katherine Schipper and “Accounting research: On the relevance of research to practice” by Jim [...] Read more > >

* UPDATE: The archived video is shown above. Please note that the welcome screen is displayed for the first 11 minutes and 10 seconds. You’ll want to skip to 11:10 in the video to begin seeing the discussion. We just finished a great Roundtable with Jim Leisenring from the IASB. We will get the video online [...] Read more > >

How often do we get to use big esoteric words from philosophy when we are talking about accounting standards?  Not often enough! Usually, the only philosophical terms we use are ‘normative’ and ‘positive,’ and I think many of us are pretty comfortable with the notion that standard setters are trying to answer normative questions (what should [...] Read more > >

On Tuesday, Nov 17th, 4 pm ET, we will be joined by Susan Krische (University of Illinois at Urbana-Champaign).  Susan recently returned from an academic fellowship with the Office of the Chief Accountant at the Securities and Exchange Commission.  In light of her experience at the SEC, Susan will be leading a discussion on how [...] 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 > >

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 > >

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 > >

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 > >

  I thought we had a great discussion last Wednesday  regarding the link between revenues and expenses.  For those who could not attend, you can listen to the archive session.   One of the key results in the Donelson, Jennings, and McInnis paper is that the special items component of earnings has increased recently, and this component [...] Read more > >

Yesterday (September 10, 2009), Rob Bloomfield posted regarding a legal perspective on FASB Accounting Standards Codification Topic 450 (FAS 5 – Accounting for Contingencies) and proposed changes in the disclosure rules for litigation-related contingencies.  This post relates to both the FAS 5 issue as well as an earlier discussion regarding conducting research with the FASB. While serving [...] Read more > >

Economist-bashing has been a popular sport lately, with current criticism coming from the left.  Paul Krugman weighed in with a long piece in the New York Times, and now the Huffington Post has an article claiming that the Federal Reserve has quashed research critical of its policies by spreading around lots of money and prestige.  [...] Read more > >

If you read our ABOUT page at the top menu of the FASRI website, you will see that FASRI doesn’t just lead discussions about accounting research (as fascinating as that may be).  We also actively support researchers who are willing to work with FASB staff to conduct original research studies.  At next week’s Round Table [...] Read more > >

The comment letter deadline for the IASB/FASB discussion paper on revenue recognition was June 19, 2009. The staff recently presented a high-level summary of the 200+ comment letters received by the boards. Given my recent posts (July 30 and Aug. 11) on the AAA FASC’s comment letter, I thought it might be useful to consider [...] Read more > >

So far, no one has responded to my questions about the importance of contracts for revenue recognition. So, let me venture to ask a few more questions that occurred to me while reading the FASC’s comment letter on the revenue recognition discussion paper. In their response to Q9, the authors state: The traditional “income statement” approach suggests [...] Read more > >

Steve Kachelemeier, Senior Editor of The Accounting Review, will join us on Wednesday, August 19th, at 11am ET.  As usual, Steve will take a few minutes to make his opening points, and then we will turn to Q&A.  Please come prepared with questions, and feel free to suggest some in the comment thread below. To get [...] Read more > >

Everyone, it seems, likes to complain about the decisions of the FASB and IASB.  Some complain that the Boards are too beholden to the wishes of preparers, by allowing them to park debt off their balance sheets, hide volatile income numbers in the Statement of Changes in Shareholder’s Equity (rather than running through earnings), and [...] Read more > >

The AAA Financial Accounting Standards Committee (FASC) recently submitted a comment letter in response to the FASB/IASB’s discussion paper on revenue recognition. This letter is unusual because it is one of few (if any others) that draw on existing academic research to support its arguments. In that regard, the FASC has provided a useful service [...] Read more > >

A short article from the Economist serves as an introduction to two other articles.  The intro has a long comment section.  It’s definitely worth a look.  A sample: The charge that most economists failed to see the crisis coming also has merit. To be sure, some warned of trouble. The likes of Robert Shiller of Yale, [...] Read more > >

Office Hours next week will feature a conversation with Anthony Hopwood about what the financial crisis means for accounting (and finance) researchers.  We will be changing our schedule a little bit:  the session will be at 11am ET, Tuesday, July 14th. Information about getting to the session can be found here. Anthony has a most impressive [...] Read more > >

Last week, a revised version of “A Research Based Perspective on the SEC’s Proposed Rule on Roadmap for Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by U.S. Issuers,” comments from the Financial Accounting Standards Committee of the American Accounting Association, appeared on SSRN.  In this post, I offer [...] Read more > >

Anup Srivastava (Northwestern) presented a research paper at today’s FASRI Office Hours. In this post, I briefly recap the takeaways from the paper and some of the questions that were asked by participants in today’s office hours. Anup’s paper examines how the constraints on revenue recognition imposed by SOP 97-2 Software Revenue Recognition affect the informativeness [...] Read more > >

My guess is that most doctoral students in accounting are still being taught the same history I have been:  In the beginning, accounting research was shapeless and without form.  Wait, I meant normative and qualitative.  Then, with the publication of Ball and Brown’s 1968 paper, the literature has taken a sharp turn toward positivism (drawing [...] Read more > >

You know that comprehensive be-all-and-end-all literature review you always wanted to write on fair value accounting (or revenue recognition or principles-based accounting standards, etc.)?  You’ve put it off because it was simply too much work for too little benefit to your research program and reputation.  Well, FASRI is here to encourage you to do just [...] Read more > >

Should standard setters care about potential judgment biases introduced by implementation guidance? I was recently reading through a paper by Shana Clor-Proell and Mark Nelson (Journal of Accounting Research, Vol. 45, Iss. 4, September 2006) entitled, “Accounting Standards, Implementation Guidance, and Example-Based Reasoning.”  In this paper, Shana and Mark examine how the type of example [...] Read more > >