Economic consequences of mandatory GAAP changes: The case of SFAS No. 158

Abraham N. Fried and Paquita Y. Davis-Friday

Advances in accounting, 2013, vol. 29, issue 2, 186-194

Abstract: This study examines management's reaction to the SFAS No. 158 requirement to recognize previously disclosed post-retirement benefit obligations on the balance sheet. The results indicate that managers attempted to mitigate the impact of the standard by increasing the assumed pension discount rate in subsequent periods. Further, the discount rate choice was related to the magnitude of the SFAS No. 158 balance sheet adjustment. Specifically, firms with larger required liability adjustments and more volatile pension assets and obligations were more likely to increase their discount rates. The findings have important implications for research regarding the economic consequences of accounting regulations and in particular the debate surrounding recognition versus disclosure since they indicate that managers react to the relocation of information from the financial statement footnotes to the balance sheet.

Keywords: Post-retirement benefit plans; Disclosure versus recognition; Discount rate; SFAS No. 158 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:29:y:2013:i:2:p:186-194

DOI: 10.1016/j.adiac.2013.05.001

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