Disagreement over the persistence of earnings components: evidence on the properties of management-specific adjustments to GAAP earnings

Young-Soo Choi (), Stephen Lin (), Martin Walker () and Steven Young ()
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Young-Soo Choi: Lancaster University
Stephen Lin: Florida International University
Martin Walker: University of Manchester
Steven Young: Lancaster University

Review of Accounting Studies, 2007, vol. 12, issue 4, No 4, 595-622

Abstract: Abstract We examine disagreement between management and Thomson Datastream over the persistence of earnings components. Using income statement and footnote disclosures, we identify the source and properties of disputed items. Disagreements typically reflect opaque reporting practices (for example, in the case of transitory operating items) and restrictive classification rules (for example, in the case of discontinued operations). Incremental and relative value relevance tests suggest that the majority of management-specific adjustments reflect appropriate classification of earnings components by insiders. Nevertheless, evidence consistent with strategic disclosure does emerge for a subset of management adjustments.

Keywords: Non-GAAP earnings; Transitory items; Disagreement (search for similar items in EconPapers)
JEL-codes: M4 (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1007/s11142-007-9048-x

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