Amanda M. Convery, Mary S. Hill, M. Vulcheva, Daniel D. Wangerin, Donal Byard, Shannon Garavaglia, Kurt H. Gee, Ole‐Kristian Hope, Phillip C. Stocken
The Financial Accounting and Reporting Section of the American Accounting Association has charged the Financial Reporting Policy Committee with responding to requests for comment from standard setters on issues related to financial reporting. The Committee is pleased to respond to proposed disclosure amendments in the FASB’s Exposure Draft, Disaggregation of Income Statement Expenses. The proposed disclosures in the Exposure Draft are intended to help investors better understand the components of an entity’s expenses and overall performance. The Committee evaluated the Exposure Draft and believes that, overall, the proposed amendments will provide decision-useful information to investors by enhancing their ability to evaluate and predict an entity’s performance. However, the Committee has several specific recommendations that we believe will better meet the objectives of the Exposure Draft. We summarize relevant findings from academic research to support our conclusions and recommendations. We also offer suggestions for future research. JEL Classifications: M41; M48.
{"title":"Response to the Financial Accounting Standards Board’s Exposure Draft “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”","authors":"Amanda M. Convery, Mary S. Hill, M. Vulcheva, Daniel D. Wangerin, Donal Byard, Shannon Garavaglia, Kurt H. Gee, Ole‐Kristian Hope, Phillip C. Stocken","doi":"10.2308/jfr-2023-033","DOIUrl":"https://doi.org/10.2308/jfr-2023-033","url":null,"abstract":"\u0000 The Financial Accounting and Reporting Section of the American Accounting Association has charged the Financial Reporting Policy Committee with responding to requests for comment from standard setters on issues related to financial reporting. The Committee is pleased to respond to proposed disclosure amendments in the FASB’s Exposure Draft, Disaggregation of Income Statement Expenses. The proposed disclosures in the Exposure Draft are intended to help investors better understand the components of an entity’s expenses and overall performance. The Committee evaluated the Exposure Draft and believes that, overall, the proposed amendments will provide decision-useful information to investors by enhancing their ability to evaluate and predict an entity’s performance. However, the Committee has several specific recommendations that we believe will better meet the objectives of the Exposure Draft. We summarize relevant findings from academic research to support our conclusions and recommendations. We also offer suggestions for future research.\u0000 JEL Classifications: M41; M48.","PeriodicalId":506454,"journal":{"name":"Journal of Financial Reporting","volume":"545 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141852326","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We explore the role of credit ratings in global markets and highlight potential opportunities for research on the African credit rating agency market. We trace the evolution of credit ratings and conduct a comprehensive literature review of existing studies globally that explore determinants, properties, and capital market impacts of credit ratings. We then evaluate the African credit rating agency landscape, showcasing the contribution of local credit rating agencies. We end by suggesting research areas that could leverage the characteristics of the African context. We also highlight recent calls for public sector credit rating agencies as an alternative approach to solving persistent rating coverage gaps. Overall, our paper aims to provide a nuanced understanding of the credit rating landscape in Africa, offering insights into its challenges, opportunities, and future research directions.
{"title":"The Credit Rating Agency Market in Africa: Landscape and Future Research Directions","authors":"Saveshen Pillay, A. Sikochi","doi":"10.2308/jfr-2022-007","DOIUrl":"https://doi.org/10.2308/jfr-2022-007","url":null,"abstract":"\u0000 We explore the role of credit ratings in global markets and highlight potential opportunities for research on the African credit rating agency market. We trace the evolution of credit ratings and conduct a comprehensive literature review of existing studies globally that explore determinants, properties, and capital market impacts of credit ratings. We then evaluate the African credit rating agency landscape, showcasing the contribution of local credit rating agencies. We end by suggesting research areas that could leverage the characteristics of the African context. We also highlight recent calls for public sector credit rating agencies as an alternative approach to solving persistent rating coverage gaps. Overall, our paper aims to provide a nuanced understanding of the credit rating landscape in Africa, offering insights into its challenges, opportunities, and future research directions.","PeriodicalId":506454,"journal":{"name":"Journal of Financial Reporting","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140784961","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Kristian D. Allee, Devon Erickson, Adam M. Esplin, T. Yohn
The FASB continues to debate useful format and disaggregation choices of financial performance information as part of its disaggregation of income statement expenses project. Using a survey of 235 investment professionals, this study provides insight into their preferences regarding income statement presentation and standardization. Overall, we find that investment professionals are generally satisfied with the level of disclosure firms currently provide in the income statement. However, the investment professionals surveyed generally think that companies should be required to use the same labels for common lines on the income statement and that operating and nonoperating activities should be formally defined. They also generally think that GAAP should allow managers flexibility to present non-GAAP measures or subtotals on the income statement. Our study provides insights for the FASB on the views of investment professionals and for academics and financial statement users regarding the information preferences of key information intermediaries in financial markets. Data Availability: Data are available upon request. JEL Classifications: M41; M44; M45; G29.
{"title":"Investment Professionals’ Preferences Regarding Income Statement Presentation","authors":"Kristian D. Allee, Devon Erickson, Adam M. Esplin, T. Yohn","doi":"10.2308/jfr-2023-004","DOIUrl":"https://doi.org/10.2308/jfr-2023-004","url":null,"abstract":"\u0000 The FASB continues to debate useful format and disaggregation choices of financial performance information as part of its disaggregation of income statement expenses project. Using a survey of 235 investment professionals, this study provides insight into their preferences regarding income statement presentation and standardization. Overall, we find that investment professionals are generally satisfied with the level of disclosure firms currently provide in the income statement. However, the investment professionals surveyed generally think that companies should be required to use the same labels for common lines on the income statement and that operating and nonoperating activities should be formally defined. They also generally think that GAAP should allow managers flexibility to present non-GAAP measures or subtotals on the income statement. Our study provides insights for the FASB on the views of investment professionals and for academics and financial statement users regarding the information preferences of key information intermediaries in financial markets.\u0000 Data Availability: Data are available upon request.\u0000 JEL Classifications: M41; M44; M45; G29.","PeriodicalId":506454,"journal":{"name":"Journal of Financial Reporting","volume":"151 19","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140793106","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate changes in analysts’ accrual-related forecast optimism after the disappearance of the accrual anomaly. We find that such optimism persists in the no-anomaly period, particularly when analysts’ incentives are aligned with greater optimism (i.e., for firms with high external financing). By contrast, the accrual-related forecast optimism declines when analysts’ incentives for optimism are low and in circumstances where analysts would have been more aware of accruals information after the anomaly became publicized (i.e., when analysts issued a cash flow forecast). These findings suggest that analysts’ incentives can offset forecast improvements that their heightened accrual awareness would otherwise allow. They also highlight the importance of considering both analysts’ incentives and knowledge when interpreting their forecasts. Data Availability: Data are available from sources identified in the text. JEL Classifications: G14; G29; M41.
{"title":"Changes in Analysts’ Accrual-Related Forecast Optimism after the Disappearance of the Accrual Anomaly","authors":"Sami Keskek, Senyo Tse","doi":"10.2308/jfr-2022-005","DOIUrl":"https://doi.org/10.2308/jfr-2022-005","url":null,"abstract":"\u0000 We investigate changes in analysts’ accrual-related forecast optimism after the disappearance of the accrual anomaly. We find that such optimism persists in the no-anomaly period, particularly when analysts’ incentives are aligned with greater optimism (i.e., for firms with high external financing). By contrast, the accrual-related forecast optimism declines when analysts’ incentives for optimism are low and in circumstances where analysts would have been more aware of accruals information after the anomaly became publicized (i.e., when analysts issued a cash flow forecast). These findings suggest that analysts’ incentives can offset forecast improvements that their heightened accrual awareness would otherwise allow. They also highlight the importance of considering both analysts’ incentives and knowledge when interpreting their forecasts.\u0000 Data Availability: Data are available from sources identified in the text.\u0000 JEL Classifications: G14; G29; M41.","PeriodicalId":506454,"journal":{"name":"Journal of Financial Reporting","volume":"19 11","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139873632","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate changes in analysts’ accrual-related forecast optimism after the disappearance of the accrual anomaly. We find that such optimism persists in the no-anomaly period, particularly when analysts’ incentives are aligned with greater optimism (i.e., for firms with high external financing). By contrast, the accrual-related forecast optimism declines when analysts’ incentives for optimism are low and in circumstances where analysts would have been more aware of accruals information after the anomaly became publicized (i.e., when analysts issued a cash flow forecast). These findings suggest that analysts’ incentives can offset forecast improvements that their heightened accrual awareness would otherwise allow. They also highlight the importance of considering both analysts’ incentives and knowledge when interpreting their forecasts. Data Availability: Data are available from sources identified in the text. JEL Classifications: G14; G29; M41.
{"title":"Changes in Analysts’ Accrual-Related Forecast Optimism after the Disappearance of the Accrual Anomaly","authors":"Sami Keskek, Senyo Tse","doi":"10.2308/jfr-2022-005","DOIUrl":"https://doi.org/10.2308/jfr-2022-005","url":null,"abstract":"\u0000 We investigate changes in analysts’ accrual-related forecast optimism after the disappearance of the accrual anomaly. We find that such optimism persists in the no-anomaly period, particularly when analysts’ incentives are aligned with greater optimism (i.e., for firms with high external financing). By contrast, the accrual-related forecast optimism declines when analysts’ incentives for optimism are low and in circumstances where analysts would have been more aware of accruals information after the anomaly became publicized (i.e., when analysts issued a cash flow forecast). These findings suggest that analysts’ incentives can offset forecast improvements that their heightened accrual awareness would otherwise allow. They also highlight the importance of considering both analysts’ incentives and knowledge when interpreting their forecasts.\u0000 Data Availability: Data are available from sources identified in the text.\u0000 JEL Classifications: G14; G29; M41.","PeriodicalId":506454,"journal":{"name":"Journal of Financial Reporting","volume":"63 3","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139813780","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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