e-journal

Impact of accounting choices on firm valuation and earnings quality

---

Purpose – The purpose of this paper is to examine whether the choice of accounting treatment of
transition obligation under SFAS 106 affects the value of firms, and also whether the quality of
earnings is improved after the implementation of SFAS 106.
Design/methodology/approach – Different regression models were employed on a sample of 50
immediate recognition firms and 50 matched prospective recognition firms. Chow test is also used to
investigate the quality of earnings before and after the implementation of SFAS 106.
Findings – In spite of the significant difference in impact on earnings from the choice of treatment of
transition obligation, the accounting choice has no significant impact on the total value relevance of
earnings and book value. When immediate recognition method is applied, investors ignore the onetime
charge of transition obligation, and rely more on book value in the valuation of a firm. However,
when prospective recognition method is applied, both earnings and book value are value-relevant in
the adoption year and also in the subsequent year. In addition, the paper finds that the
implementation of SFAS 106 improves the value relevance of earnings.
Research limitations/implications – Results are limited by the accuracy of the models used to
measure value relevance of earnings and book value of equity.
Practical implications – Results may have implications for managers’ choice of accounting
treatment, and the evidence seems to support accrual basis over cash basis on earnings
measurement.
Originality/value – The paper uses the value relevance approach to analyze the impact of SFAS
106 on the quality of earnings and book value of equity.

Keywords Financial benefits, Accounting, Equity capital

---

Ketersediaan

Tidak ada salinan data

Informasi Detail

Judul Seri

Review of Accounting and Finance

No. Panggil

-

Penerbit

: Emerald Group., 2007

Deskripsi Fisik

Review of Accounting and Finance Vol. 6 No. 4, 2007 pp. 419-441

Bahasa

English

ISBN/ISSN

-

Klasifikasi

-

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

AKUNTANSI

Info Detail Spesifik

-

Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

Komentar

---

Anda harus masuk sebelum memberikan komentar