Earnings components and the asymmetric timeliness of earnings: the case of FRS 3 in the UK |
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| Authors: | Ann L-C Chan Stephen WJ Lin Norman Strong |
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| Institution: | 1. Department of Accounting , National Chengchi University , Taipei, Taiwan lcchan@nccu.edu.tw;3. School of Accounting, College of Business Administration , Florida International University , Florida, USA;4. Accounting and Finance Group , Manchester Business School, University of Manchester , Manchester, UK |
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| Abstract: | We exploit a unique setting to examine how an accounting regulation change affects the asymmetric timeliness of earnings. Financial Reporting Standard No. 3: Reporting Financial Performance (FRS 3) changed the way listed UK companies recognised bad news through ordinary or extraordinary items. FRS 3 tightened the definition of extraordinary items but gave wider discretion in classifying exceptional items. The results were that, after FRS 3, the asymmetric timeliness of earnings before extraordinary items increased and the association of earnings conservatism with discretionary accruals was weaker. |
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| Keywords: | conservatism earnings components FRS 3 |
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