Recognition and Disclosure Reliability: Evidence from SFAS No. 106*

This paper examines a fundamental question of interest to researchers and regulators: Does the market treat disclosed financial statement information as if it is less reliable than information recognized in the body of the financial statements? Specifically, we compare the perceived reliability of liabilities for retiree benefits other than pensions (PRBs) disclosed prior to adoption of Statement of Financial Accounting Standards No. 106 (SFAS No. 106) with the perceived reliability of PRB liabilities subsequently recognized under SFAS No. 106. Overall, the evidence is consistent with the market treating disclosed PRB liabilities as less reliable than recognized PRB liabilities and pension liabilities. However, once PRB liabilities are recognized, they do not appear to be any less reliable than pension liabilities. These findings are inconsistent with the Choi, Collins, and Johnson 1997 conclusion that PRB liabilities are inherently less reliable than pension liabilities. The paper also investigates factors that may have contributed to the lower perceived disclosure reliability. Our results suggest that the market perceived PRB liability disclosures to be less reliable when firms provided range disclosures, had higher probabilities of reducing plan benefits, or had lower ratios of retiree to total PRB obligations. These findings suggest that reliability may have been enhanced if more supporting details had been provided in Staff Accounting Bulletin No. 74 disclosures.     

AN EXPLORATORY COST-BENEFIT STUDY OF A BRITISH STANDARD FOR UPHOLSTERED FURNITURE FABRIC

Without an evaluation of the costs and benefits arising from the production of standards for consumer goods, consumer policy makers will be operating with incomplete information in their decision-making. A standard specification for a fabric used in upholstered furniture is costed to see what resources were used in its preparation and what benefits can be estimated to have accrued to the consumer.     

Creating Early Success in Financial Accounting: Improving Performance on Adjusting Journal Entries*

Adjusting journal entries constitute a necessary component of accrual basis accounting and are critical to the accuracy of financial statements. However, accounting students often struggle to comprehend these accounting entries, which is a concern given that failure to understand early topics in accounting courses has been found to impact course performance and selection of undergraduate major. Perceiving accounting as a language, we utilize psycholinguistic theory to understand how an instructor may improve coherence of students’ mental structures of accounting problems. We conduct an experiment to investigate the extent to which a simple instructor intervention, requiring that the initial deferral transaction be recorded, is able to improve student performance on the subsequent deferral adjustments, and whether this improvement is consistent across problem sets that differ in task difficulty. Consistent with our theoretical prediction, we find that this intervention results in improved performance. The beneficial effect of the intervention is found to differ across problem‐set task difficulty. Implications for accounting education are discussed.     

How safe was Europe as a haven for savings?

The growth of specialized unit trusts rather than broader-based general funds challenges individual investors with some difficult choices when entrusting their savings to fund managers. The problem involved are examined in the context of the development of the European Growth Unit Trust sector in the United Kingdom which is followed from birth to maturity.     

MEASURING MANAGEMENT PERFORMANCE OF DAIRY FARMERS

Increased emphasis has centered on methods to measure and predict managerial performance of farmers. In doing this, one of the foremost problems is the development of a reliable and valid criterion variable, because of a number of characteristics of farming and the farm-family complex.
This article discusses problems in developing a criterion of management performance and examines the use of rating techniques for this purpose. Two rating techniques are used to measure management performance on Missouri dairy farms. The results, while suggesting major differences both in the criterion of managerial performance used by different people and in the ratings, identify sources of the differences and opportunities to improve the measuring of management performance.