Mandatorily Conservative Accounting: Evidence and Implications
University of California, Berkeley - Haas School of Business
Richard G. Sloan
University of California at Berkeley - Haas School of Business
Boston University - School of Management
February 19, 2013
A large body of accounting research concludes that various economic incentives induce managers to engage in the discretionary application of conservative accounting. We extend existing research by modeling the impact of mandatory accounting rules on conservative accounting. For example, accounting rules often mandate impairments when assets’ fair values drop materially below their book values. After controlling for mandatorily conservative accounting, we find that some previous variables representing economic incentives become insignificant.
Number of Pages in PDF File: 53
Keywords: mandatory conservatism, conditional conservatism, book-to-market, asset impairment
JEL Classification: M41, C23, D21, G32working papers series
Date posted: March 14, 2012 ; Last revised: February 20, 2013
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