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

Posted: 17 Feb 2000

See all articles by Paquita Y. Davis-Friday

Paquita Y. Davis-Friday

Zicklin School of Business; City University of New York - Stan Ross Department of Accountancy

L. Buky Folami

University of Alabama in Huntsville

Chao-Shin Liu

University of Notre Dame - Department of Accountancy

H. Fred Mittelstaedt

University of Notre Dame

Abstract

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.

JEL Classification: G19, M41, M44, M45

Suggested Citation

Davis-Friday, Paquita Y. and Folami, L. Buky and Liu, Chao-Shin and Mittelstaedt, H. Fred, The Value Relevance of Financial Statement Recognition vs. Disclosure: Evidence from SFAS No. 106. The Accounting Review, Vol 74, No 4, October 1999. Available at SSRN: https://ssrn.com/abstract=202292

Paquita Y. Davis-Friday (Contact Author)

Zicklin School of Business ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States
646-312-3048 (Phone)

City University of New York - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3048 (Phone)
646-312-3161 (Fax)

L. Buky Folami

University of Alabama in Huntsville ( email )

College of Administrative Science Department of Accounting & Information Systems
Huntsville, AL 35899
United States
256-890-6582 (Phone)
256-890-6328 (Fax)

Chao-Shin Liu

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6029 (Phone)
574-631-5255 (Fax)

H. Fred Mittelstaedt

University of Notre Dame ( email )

374 Mendoza College of Business
Notre Dame, IN 46556-0399
United States
574-631-5087 (Phone)
574-631-5255 (Fax)

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