Pension disclosures under SFAS No. 87: Theory and evidence*

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43 citations0/0 files storedContemporary Accounting Research

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Auditing, Earnings Management, Governance Corporate Finance and Governance Accounting Theory and Financial Reporting

Abstract

Abstract. This study analyzes the choices made by 279 firms in response to the opportunity to adopt the new pension accounting standard. Statement of Financial Accounting Standard No. 87, in 1986 rather than 1987. It tests the influence of political and agency variables and three income‐related variables on this accounting choice. The political variables, management compensation contracts, the magnitude of the income effect of adoption, whether the firm was a “bath” firm, and the earnings position of the firm relative to the prior year are all associated with the adoption choice. These results are analyzed further by considering specific debt covenants and by exploring alternate interpretations of the meaning of the change in earnings variable by assessing interactions between it and the political and agency variables. Résumé. L'auteur analyse les choix faits par 279 entreprises par suite de l'option qui leur était offerte d'adopter la nouvelle norme de comptabilisation des régimes de retraite. Statement of Financial Accounting Standard No. 87, en 1986 plutôt qu'en 1987. Il vérifie l'influence des variables politiques et des variables mandant‐mandataire, ainsi que de trois variables se rattachant aux bénéfices, sur ce choix comptable. Chacun des facteurs suivants est associé à l'option d'adoption: variables politiques, contrats de rénumération des cadres, ampleur des conséquences de l'adoption sur les bénéfices, occasion de flambée des bénéfices et bénéfices de l'entreprise par rapport aux bénéfices de l'exercice précédent. Ces résultats font l'objet d'une analyse plus poussée dans laquelle l'auteur tient compte de clauses restrictives particulières et explore d'autres interprétations de la signification de la fluctuation de la variable des bénéfices en évaluant les interactions entre cette fluctuation et les variables politiques ainsi que les variables mandant‐mandataire.

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References

1985Positive Accounting Theory 1985The effect of bonus schemes on accounting decisions 2011The effects of bonus schemes on accounting decisions 1988Evidence of Earnings Management from the Provision for Bad Debts 1988Write-Offs As Accounting Procedures to Manage Perceptions 1981An income strategy approach to the positive theory of accounting standard setting/choice 1990Accounting-based constraints in public and private debt agreements 1981Smoothing income numbers : objectives, means, and implications

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2005Earnings management under price regulation: Empirical evidence from the Spanish electricity industry 1999Vingt ans de recherche positive en comptabilité financière 2012Income smoothing behaviour by Asian transportation firms 1993The FASB's Policy of Extended Adoption for New Standards: An Examination of FAS No. 87.2017Discretionary accounting choices: the case of IAS 19 pension accounting 2007

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