The Value Relevance of Financial Statement Recognition vs. Disclosure: Evidence from SFAS No. 106

This study examines whether the market values financial statement data differently if it is disclosed instead of recognized in the body of the financial statements. We identify a sample of 229 SFAS No. 106 adopters who disclose an estimate of their anticipated liability for retiree benefits other th...

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Bibliographic Details
Published in:The Accounting review 1999-10, Vol.74 (4), p.403-423
Main Authors: Davis-Friday, Paquita Y., Folami, L. Buky, Liu, Chao-Shin, Mittelstaedt, H. Fred
Format: Article
Language:English
Subjects:
Accounting
Defined benefit pension plan
Disclosure
Early adopters
Economic benefits
FASB standards
FASB statements
Financial accounting standards
Financial economics
Financial liabilities
Financial statements
Liability
Mathematical models
Pension liabilities
Pension plans
Regression coefficients
Reliability
Research design
SFAS 106
Stock prices
Studies
Valuation
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Summary:This study examines whether the market values financial statement data differently if it is disclosed instead of recognized in the body of the financial statements. We identify a sample of 229 SFAS No. 106 adopters who disclose an estimate of their anticipated liability for retiree benefits other than pensions (PRB) in their financial reports prior to the year of recognition. We then test whether the disclosed estimate of the PRB liability is valued differently by the market than is the subsequently recognized PRB liability. We provide modest and model-sensitive evidence that the recognized PRB liability receives more weight than the disclosed liability in market value association tests.
ISSN:0001-4826
1558-7967
DOI:10.2308/accr.1999.74.4.403