This dissertation investigates the economic consequences from hedge accounting signals and risk management disclosure. I first examine the product market consequences to these accounting signals and related disclosure in Chapter 1, then stock market reactions to disclosure requirements in Chapter 2. Chapter 1 examines potential entrants’ strategic entry decisions in response to incumbents’ accounting information and related disclosure. I predict that potential entrants are more likely to enter markets in which the incumbents’ accounting information suggests higher future production costs that are specific to the incumbents themselves. I further hypothesize that the relation is stronger when the accounting signals are accompanied by more disclosure. Using detailed U.S. airline industry data and hedge accounting disclosure under SFAS 133, I find that potential entrants are more likely to enter routes in which the incumbents’ lower accumulated other comprehensive income from fuel hedges suggests their higher future production costs. This entry pattern is stronger when incumbents have more transparent annual report disclosure regarding their fuel hedge programs. The entry pattern is also stronger after a systematic increase in risk management disclosure requirements following the (exogenous) adoption of SFAS 161. Chapter 2 analyzes stock returns of U.S. airlines around events leading up to the adoption of SFAS 161. SFAS 161 enhanced the disclosure requirements for derivatives and hedging activities. I find that U.S. airlines experienced statistically significant positive returns around the key events leading up to the adoption of SFAS 161. I then examine the cross-sectional variation of the returns around these events. Regression results provide initial support for the real effects theory that greater disclosure requirements could distort firms’ hedging and production decisions and lead to suboptimal behavior. In summary, this dissertation provides evidence that competitors use hedge accounting signals and related disclosure in making product market decisions. Meanwhile, additional risk-management disclosures may also distort firms’ hedging and production behavior, leading to suboptimal decisions. This dissertation sheds light on the ongoing projects by the FASB and the IASB on hedge accounting and disclosure and informs the regulators that costs and benefits should be weighted in hedge accounting policy setting.

<p><strong>Bakgrund och problem: </strong>Som ett steg i konvergeringsprocessen med FASB startade IASB år2006 ett projekt med syfte att skapa en enhetlig standard för värdering till verkligt värde i helaIFRS. I den inledande fasen av projektet utformades ett discussion paper, där denamerikanska motsvarigheten för värdering till verkligt värde, SFAS 157, användes somutgångspunkt. En av de standarder som i hög grad innefattar värdering till verkligt värde ochsåledes berörs i stor utsträckning av projektet är IAS 39, redovisning och värdering avfinansiella instrument. Värdering av finansiella instrument är ett komplext och vidaomdebatterat område vilket har uppmärksammats speciellt under finanskrisen då mycketkritik har riktats mot SFAS 157. Definitionerna av verkligt värde skiljer sig i dagsläget mellanSFAS 157 och IAS 39 och organisationer runt om i världen har ställt sig kritiska till en direkttillämpning av den amerikanska definitionen eftersom den anses vara för marknadsbaserad.</p><p><strong>Syfte: </strong>Syftet med studien är att beskriva hur den praktiska redovisningen enligt IAS 39 kantänkas påverkas om IASB inför värderingsmetoderna i SFAS 157, samt beskriva vilkauppfattningar sakkunniga har kring dagens sätt att värdera till verkligt värde samt hur dessastämmer överens med definitionen och värderingsmetoderna i IAS 39 och SFAS 157.</p><p><strong>Metod: </strong>En kvalitativ undersökningsmetod har använts där fem intervjuer har utförts för attsamla in studiens empiriska material. Tre av dessa intervjuer genomfördes med verksammapersoner inom banksektorn. Resterande intervjuer genomfördes med sakkunniga personerinom studiens ämnesområde, varav en revisor och en redovisningsexpert.</p><p><strong>Resultat och slutsats:</strong> Resultatet visar att de flesta av värderingsmetoderna i IAS 39 som harundersökts i studien är mer lämpliga än de i SFAS 157. Vidare visar studien att definitionenav verkligt värde i IAS 39 är att föredra framför definitionen i SFAS 157. IAS 39 erbjuder idagsläget en viss flexibilitet som i viss mån ger utrymme för företagsspecifika värderingar.Denna flexibilitet är uppskattad av samtliga respondenter men skulle kunna utvidgas något föratt bättre återspegla bankernas affärsmodell. Definitionen i SFAS 157 skulle dock leda tillmindre företagsspecifika inslag och därmed begränsa möjligheten att redovisa relevantinformation om bankernas ekonomiska ställning.</p> / <p><strong>Background and problem:</strong> As a step in the process of harmonisation with FASB, IASBstarted a project in 2006 aiming at establishing a common standard for fair valuemeasurement within all IFRS. In the first phase of the project a discussion paper was issued,where the American counterpart for fair value measurement, SFAS 157, was used as a base.One of the standards which to a great extent includes fair value measurement, and therefore isdeeply affected by the project, is IAS 39, recognition and measurement of financialinstruments. Fair value measurement of financial instruments is a complex and widelydebated area which has been actualised specifically during the financial crisis, when a lot ofcriticism has been directed towards SFAS 157. Today the definition of fair value differsbetween SFAS 157 and IAS 39, and organisations around the world have been critical to adirect use of the American definition, since it is regarded as too market oriented.</p><p><strong>Aim: </strong>The purpose of the study is to describe how the practical accounting according to IAS39 could be affected if IASB introduce the measurement methods of SFAS 157, and todescribe the opinions of experts regarding the present way of measuring fair value and howthese are in accordance with the definition and measurement methods of IAS 39 and SFAS157.</p><p><strong>Method:</strong> A qualitative research method has been used, where five interviews were conductedto collect the empirical material for the study. Three of these interviews were made withpersons active in the banking sector. The rest of the interviews were made with experts withinthe subject area of the study, one auditor and one expert in accounting.</p><p><strong>Result and conclusion:</strong> The result shows that most of the measurement methods of IAS 39,which has been examined in the study, are more adequate than those in SFAS 157. The studyfurther shows that the definition of fair value in IAS 39 is preferable to the definition in SFAS157. IAS 39 allows at present a certain degree of company specific measurements. Thisflexibility is appreciated by all of the respondents, but could be further expanded in order tobetter reflect the business model of the banks. The definition in SFAS 157 would, on the otherhand, lead to less company specific measurements and thus limit the possibilities to showrelevant information regarding the economic situation of the banks.</p>

Bakgrund och problem: Som ett steg i konvergeringsprocessen med FASB startade IASB år2006 ett projekt med syfte att skapa en enhetlig standard för värdering till verkligt värde i helaIFRS. I den inledande fasen av projektet utformades ett discussion paper, där denamerikanska motsvarigheten för värdering till verkligt värde, SFAS 157, användes somutgångspunkt. En av de standarder som i hög grad innefattar värdering till verkligt värde ochsåledes berörs i stor utsträckning av projektet är IAS 39, redovisning och värdering avfinansiella instrument. Värdering av finansiella instrument är ett komplext och vidaomdebatterat område vilket har uppmärksammats speciellt under finanskrisen då mycketkritik har riktats mot SFAS 157. Definitionerna av verkligt värde skiljer sig i dagsläget mellanSFAS 157 och IAS 39 och organisationer runt om i världen har ställt sig kritiska till en direkttillämpning av den amerikanska definitionen eftersom den anses vara för marknadsbaserad. Syfte: Syftet med studien är att beskriva hur den praktiska redovisningen enligt IAS 39 kantänkas påverkas om IASB inför värderingsmetoderna i SFAS 157, samt beskriva vilkauppfattningar sakkunniga har kring dagens sätt att värdera till verkligt värde samt hur dessastämmer överens med definitionen och värderingsmetoderna i IAS 39 och SFAS 157. Metod: En kvalitativ undersökningsmetod har använts där fem intervjuer har utförts för attsamla in studiens empiriska material. Tre av dessa intervjuer genomfördes med verksammapersoner inom banksektorn. Resterande intervjuer genomfördes med sakkunniga personerinom studiens ämnesområde, varav en revisor och en redovisningsexpert. Resultat och slutsats: Resultatet visar att de flesta av värderingsmetoderna i IAS 39 som harundersökts i studien är mer lämpliga än de i SFAS 157. Vidare visar studien att definitionenav verkligt värde i IAS 39 är att föredra framför definitionen i SFAS 157. IAS 39 erbjuder idagsläget en viss flexibilitet som i viss mån ger utrymme för företagsspecifika värderingar.Denna flexibilitet är uppskattad av samtliga respondenter men skulle kunna utvidgas något föratt bättre återspegla bankernas affärsmodell. Definitionen i SFAS 157 skulle dock leda tillmindre företagsspecifika inslag och därmed begränsa möjligheten att redovisa relevantinformation om bankernas ekonomiska ställning. / Background and problem: As a step in the process of harmonisation with FASB, IASBstarted a project in 2006 aiming at establishing a common standard for fair valuemeasurement within all IFRS. In the first phase of the project a discussion paper was issued,where the American counterpart for fair value measurement, SFAS 157, was used as a base.One of the standards which to a great extent includes fair value measurement, and therefore isdeeply affected by the project, is IAS 39, recognition and measurement of financialinstruments. Fair value measurement of financial instruments is a complex and widelydebated area which has been actualised specifically during the financial crisis, when a lot ofcriticism has been directed towards SFAS 157. Today the definition of fair value differsbetween SFAS 157 and IAS 39, and organisations around the world have been critical to adirect use of the American definition, since it is regarded as too market oriented. Aim: The purpose of the study is to describe how the practical accounting according to IAS39 could be affected if IASB introduce the measurement methods of SFAS 157, and todescribe the opinions of experts regarding the present way of measuring fair value and howthese are in accordance with the definition and measurement methods of IAS 39 and SFAS157. Method: A qualitative research method has been used, where five interviews were conductedto collect the empirical material for the study. Three of these interviews were made withpersons active in the banking sector. The rest of the interviews were made with experts withinthe subject area of the study, one auditor and one expert in accounting. Result and conclusion: The result shows that most of the measurement methods of IAS 39,which has been examined in the study, are more adequate than those in SFAS 157. The studyfurther shows that the definition of fair value in IAS 39 is preferable to the definition in SFAS157. IAS 39 allows at present a certain degree of company specific measurements. Thisflexibility is appreciated by all of the respondents, but could be further expanded in order tobetter reflect the business model of the banks. The definition in SFAS 157 would, on the otherhand, lead to less company specific measurements and thus limit the possibilities to showrelevant information regarding the economic situation of the banks.

This study examines the impact of Statements of Financial Accounting Standards No. 141 and No. 142 (hereafter SFAS 141, 142) on the characteristics of financial analysts' earnings forecasts after mergers. Specifically, I predict lower forecast errors for firms that experienced mergers after the enactment of SFAS 141, 142 than for firms that went through business combinations before those accounting changes. Study results present strong evidence that earnings forecast errors for companies involved in merging and acquisition activity decreased after the adoption of SFAS 141, 142. Test results also suggest that lower earnings forecast errors are attributable to factors specific to merging companies such as SFAS 141, 142 but not common to merging and non-merging companies. In addition, evidence implies that information in corporate annual reports of merging companies plays the critical role in this decrease of earnings forecast error. Summarily, I report that SFAS 141, 142 were effective in achieving greater transparency of financial reporting after mergers. In my complementary analysis, I also document the structure of corporate analysts' coverage in "leaders/followers" terms and conduct tests for differences in this structure: (1) across post-SFAS 141,142/pre-SFAS 141, 142 environments, and (2) between merging and non-merging firms. Although I do not identify any significant differences in coverage structure across environments, my findings suggest that lead analysts are not as accurate as followers when predicting earnings for firms actively involved in mergers. I also detect a significant interaction between the SFAS-environment code and leader/follower classification, which indicates greater improvement of lead analyst forecast accuracy in the post-SFAS 141, 142 environment relative to their followers. This interesting discovery demands future investigation and confirms the importance of financial reporting transparency for the accounting treatment of business combinations.

The financial sector due to the particularity of the industry, the government set a lot of control provisions, therefore most of the earnings management research will set financial sector excluded. In fact, the financial sector, in order to comply with the legal provisions, which the motives of earnings management may be even higher than the average company. This study used The Modified Jones Model to calculate the proxy of discretionary accruals as an earnings management¡Ffinancial holding company engaged in the amount of the core subsidiary of the format category to measure the extent of its related diversification¡Fand the implementation of SFAS No. 34 divided into two study period, to explore the relationship between the relevant level of diversification and earnings management, earnings management and financial asset disposition gains and losses, earnings management and financial performance is different. Empirical results show that: (1)Before and after of SFAS No. 34 implementation , the higher the degree of diversification of financial holding company, the earning management were higher.(2) Before and after of SFAS No. 34 implementation, the financial holding company will make use of the disposal of financial assets in order to increase the gain on disposal for earnings management.(3) Before and after of SFAS No. 34 implementation, the financial holding company will engage in earnings management operations in order to enhance the company's financial performance.

Goodwill har sedan länge varit ett kontroversiellt ämne. Genom införandet av det nya internationella regelverket IFRS kom hanteringen av goodwill att förändras. Istället för att göra årliga nedskrivningar ska nu goodwillposten hos börsnoterade företag på minst årlig basis genomgå en nedskrivningsprövning, för att se om ett nedskrivningsbehov föreligger. Detta har emellertid mottagit viss kritik, då det anses vara subjektiva bedömningar som ligger till grund. En följd av detta skulle således kunna vara att företag medvetet undviker nedskrivningar.  Kritik riktas även mot de höga goodwillposter som svenska företag redovisar. Trots den globala kris som världen har befunnit sig i sedan 2007 förefaller det som att goodwill hos svenska företag inte har påverkats i en negativ riktning. Detta kritiseras öppet av praktiserande ekonomer, samt strider mot tidigare forskning inom ämnet. Studier har funnit att makroekonomiska faktorer såsom lågkonjunktur bör leda till sänkta nivåer av goodwill, då en nedskrivning sannolikt bör vara aktuell.  För att kunna studera de fulla effekterna av en lågkonjunktur bör vidare, enligt forskning, en viss tidsfördröjning ha ägt rum. Detta åskådliggjorde ett forskningsgap över svensk ekonomi, och således något som denna uppsats ämnar fylla. Genom att studera årsredovisningar från 36 stycken svenska företag noterade på Large Cap-listan, granskades företagens andel goodwill av eget kapital. En jämförelse av goodwillposten innan lågkonjunkturen samt efter lågkonjunkturens början exekverades. För att kunna ta en eventuell effekt av en tidsfördröjning i beaktande, studerades goodwill år 2011. Ytterligare jämförelser utfördes för år 2010, 2009, 2008 och 2007 med året innan konjunkturförsämringen (som här representeras av år 2006). Detta för att undersöka om andelen goodwill i förhållande till eget kapitel minskade i ett tidigare skede av konjunkturförsämringen. Studiens resultat indikerar att de undersökta företagen inte uppvisar en lägre andel goodwill efter lågkonjunkturens början. Data visar att goodwillposten de facto var högre efter lågkonjunkturens början än innan. Detta strider mot tidigare forskning, samt är avvikande mot den trend som kan observeras i andra länder som exempelvis USA. Då även länder som USA tillämpar ett regelverk som anses vara ekvivalent med IFRS, är måhända subjektiva bedömningar av goodwillpostens värde otillräckligt för att förklara de höga goodwillposterna som förekommer i Sverige. En förklaring som eventuellt kan anses ligga bakom denna diskrepens av erhållna resultat för svenska företag och tidigare forskning om lågkonjunktur, är den svenska ekonomin. Begreppet tigerekonomi har använts för att beskriva den styrka och beständighet som har illustrerats i den svenska återhämtningen från finanskrisen.

Recently, investors have asserted that firms' loss contingency disclosures are not adequate to allow them to assess the likelihood of material losses due to litigation (i.e., litigation risk), and a debate has developed over whether the threshold for disclosure should be lowered to provide investors with more information relating to litigation. Using an experiment, I investigate two unintended consequences of lowering a disclosure threshold, as the FASB has recently proposed. First, I find that adding low probability lawsuits to the disclosure of reasonably possible lawsuits lowers prospective investors' perceptions of litigation risk relating to the disclosure, even though more lawsuits are disclosed. Second, lowering the threshold allows firms to portray the entire disclosure opportunistically, diverting attention from higher probability to lower probability lawsuits. I find evidence that firms can use such an opportunistic presentation under a lower threshold to their advantage. Specifically, prospective investors' and even short investors' perceptions were just as favorable to the firm as long investors' when the disclosure threshold was lower and firms adopted an opportunistic disclosure strategy. Thus, my findings suggest that the FASB's proposal to require disclosure of lower probability loss contingencies may have unintended consequences for investors' perceptions of firms' loss exposure.

No description available.

In this dissertation, I investigate the economic consequences of Statement of Financial Accounting Standards No. 158 (SFAS 158). SFAS 158 requires firms to move pension funding status from the footnotes to the balance sheet. Moving pension funding status from a footnote to the balance sheet improves the transparency and understandability of pension accounting, however it at the same time increases the pension liability recognized and decreases the shareholder's equity reported for firms with underfunded pension plans. I investigate whether firms take actions to mitigate the impact of SFAS 158. I also examine whether the market perceptions of the risk and cost of capital differ because of SFAS 158. I first find that while firms reduce the non-pension debt to equity ratio to minimize the cost of SFAS 158, they did not use discretionary accruals to offset the impact of SFAS 158. One interpretation of these findings is that firms' potential responses to the rule depend on the costs and benefits associated with that discretionary behavior. While accrual manipulations do not affect either real operations or cash flows, aggressive accrual manipulations can increase the probability of a qualified opinion from auditors, and financial penalties from regulators (SEC litigation). In contrast, real activity manipulation is more opaque than accounting earnings management, making it more difficult to detect by shareholders, SEC regulators, or auditors. I then find that the market perceived risk proxied by total equity risk increased after SFAS 158. However, I fail to find that the increased total equity risk is generally priced by the equity capital markets. Further analysis indicates that bond spread yield decreases after SFAS 158 for firms with underfunded pension plans, suggesting different behavior of debt investors and equity investors. This finding might be explained by the rich information environment specific to the debt market. Compared with the equity market, the debt market includes mainly sophisticated investors. Sophisticated investors have access to more firm-specific information than other investors. Given their access to potentially more informative data, the debt market response to SFAS 158 is different from the equity market. This dissertation contributes to the debate regarding the effectiveness of the pension accounting reforms incorporated in SFAS 158, and is useful to legislators, regulators, and researchers in assessing the anticipated costs and benefits of SFAS 158. In addition, this study lends support to the stream of research which documents that managers take actions to achieve certain financial reporting goals in response to new accounting rules. This study also provides insight into how firms take real actions to minimize the cost of having an under-funded defined benefit pension plan. Understanding these relationships have implications for interpreting pension numbers reported in the financial statements and designing pension accounting rules that prevent or minimize the possibility that managers take advantage of the complexity and subjectivity associated with pension accounting to influence reported earnings. Finally, this study contributes to the existing literature by highlighting the importance and necessity of considering investor sophistication in studies on recognition vs. disclosure. / Business Administration/Accounting

本研究之研究主題有兩大部份。第一部份探討公司特質與其使用衍生性金融商品之關聯性。第二部份探討公司特質與其使用衍生性金融商品程度之關聯性，並檢驗我國財務會計準則第34號及第36號公報實施後，對企業操作衍生性金融商品之影響。 第一部份之實證結果顯示，公司規模愈大、長期負債比率愈高、股利發放率愈高、流動比率愈低、研發費用率愈高以及外銷比率愈高之公司，愈傾向使用衍生性金融商品。上述公司特質為企業使用衍生性金融商品之決定因素。 第二部份之實證結果顯示，公司規模愈大、長期負債比率愈高、股利發放率愈高以及外銷比率愈高的公司，其衍生性金融商品使用程度愈大。此外，第34號及第36號公報實施後，樣本公司使用衍生性金融商品之程度低於公報實施前，故推論此兩號公報之實施，的確影響公司對於衍生性金融商品之操作，使其態度趨於保守。 / This study focuses on the following issues. First, this study examines the relationship between corporate characteristics and its use of derivatives. Second, I further investigate the relationship between corporate characteristics and its degree of use of derivatives. In addition, the impact of SFAS No.34 and No.36 on corporate use of derivatives is also examined. The main conclusions are as follows. On the first issue, the empirical results show that for the firms with greater size, greater long-term liability ratio, greater dividend payout ratio, lower current ratio, greater R&D ratio and greater export ratio, they are more likely to use derivatives. These characteristics are important determinants for corporate use of derivatives. In the second issue, the empirical results indicate that for the firms with greater size, greater long-term liability ratio, greater dividend payout ratio and greater export ratio, their degrees of using derivatives are greater. In addition, the degree of corporate use of derivatives decreases after SFAS No. 34 and No. 36 became applicable. The corporate use of derivatives became more conservative after the application of these two pronouncements.