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The Economic consequences of SFAS 106 in rate-regulated enterprises
This study investigates the impact of the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (FASB 1990, hereinafter, SFAS 106) for a sample of rate-regulated public utility firms. The results of a recent study by Espahbodi et al. (1991) of the market reaction to the issuance of the exposure draft for SFAS 106 suggest that, for a sample including both regulated and non-regulated firms, investors perceived the required disclosures as value-decreasing due to higher contracting costs. However, the unique institutional setting for rate-regulated firms implies that while a similar negative market reaction may result for some regulated firms, there is also a theoretical basis for predicting either no market reaction or a positive reaction to the proposed accounting standard. The no reaction hypothesis is motivated by the nature of the relationship between regulatory rate-setting process and special external financial reporting procedures; as a result, some regulated firms may be sheltered from the indirect costs attributed to SFAS 106. A prediction of a positive market reaction arises from the notion that accounting rules can have an effect on the way regulators set rates, resulting in a direct (positive) cash flow effect for some of the sample firms. Our results suggest that investors in public utilities did not, on average, view the proposed standard as a value-decreasing event. This result is in sharp contrast to the Espahbodi et al. (1991) finding of a large negative average reaction for firms affected by SFAS 106. We also find evidence that the market reaction at the exposure draft announcement varies cross-sectionally based on the market's exante expectation of regulators' actions and the resulting changes in revenues from the adoption (or non-adoption) of the accounting rule for ratemaking purposes. The results thus add to a growing body of literature which demonstrates differences in the market's assessment of accounting information across regulated and non-regulated industries. More importantly, the results point to the role of regulatory response in the market's assessment of impending accounting changes in regulated industries.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| AR6902 | PSB lt.dasar - Pascasarjana | 1 |
| Penerbit | USA: American Accounting Association 1994 |
|---|---|
| Edisi | Vol. 69, No. 2, Apr., 1994 |
| Subjek | SFAS 106 Postretirement Benefits (OPEB) exposure draft regulatory asset |
| ISBN/ISSN | 00014826 |
| Klasifikasi | NONE |
| Deskripsi Fisik | 17 p. |
| Info Detail Spesifik | The Accounting Review |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |