Disagreement Over the Persistence of Earnings Components: Evidence on the Properties of Management-Specific Adjustments to GAAP Earnings

Posted: 12 Dec 2007

See all articles by Young-Soo Choi

Young-Soo Choi

Sungkyunkwan University

Steve W. J. Lin

Florida International University (FIU) - School of Accounting

Martin Walker

University of Manchester - Manchester Business School

Steven Young

Lancaster University - Department of Accounting and Finance

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 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

JEL Classification: M41, M45, G12, C32

Suggested Citation

Choi, Young-Soo and Lin, Steve W. J. and Walker, Martin and Young, Steven, Disagreement Over the Persistence of Earnings Components: Evidence on the Properties of Management-Specific Adjustments to GAAP Earnings. Review of Accounting Studies, Vol. 12, No. 4, 2007, Available at SSRN: https://ssrn.com/abstract=1070862

Young-Soo Choi

Sungkyunkwan University ( email )

School of Business
53 Myeongnyun-dong 3-ga, Jongno-gu
Seoul, 110-745
Korea
+8227600423 (Phone)
+8227600440 (Fax)

Steve W. J. Lin

Florida International University (FIU) - School of Accounting ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Martin Walker (Contact Author)

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Steven Young

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+441 5245-94242 (Phone)
+441 5248-47321 (Fax)

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