Financial Reporting Uniformity: Its Relation to Comparability and Its Impact on Financial Statement Users

Journal of Business Finance & Accounting, forthcoming

Posted: 30 Jul 2018 Last revised: 6 Apr 2022

See all articles by Marcus L. Caylor

Marcus L. Caylor

Kennesaw State University

Dennis J. Chambers

Kennesaw State University

Sunay Mutlu

Kennesaw State University - Michael J. Coles College of Business

Date Written: March 21, 2022

Abstract

We explore the relation between financial reporting uniformity and comparability. We also examine the effect of uniformity on analyst coverage, analyst forecast accuracy, and analyst forecast dispersion. We develop a Compustat-based financial statement account uniformity measure based on the presentation of common financial statement line items. We define uniformity using a Jaccard similarity index where a firm’s non-missing Compustat data items are compared to a prototypical firm for that industry-year. We emphasize the conceptual difference between uniformity and comparability, and our tests do not show a significant association between uniformity and output-based accounting comparability. However, we find that the association between account uniformity and comparability becomes positive in high R&D firms, while it becomes negative in firms with higher managerial discretion. We explore the association between uniformity and information processing efficiencies, and we show that our uniformity measure is positively associated with analyst coverage. Furthermore, we partition our uniformity measure into separate income statement and balance sheet components. We find that income statement uniformity is associated with higher forecast accuracy and lower forecast dispersion, while balance sheet uniformity is associated with greater analyst coverage. Finally, we provide further support for these findings using an XBRL-based uniformity measure.

Keywords: Uniformity, Flexibility, Comparability, Analyst Forecasts, Analyst Coverage, Analyst Forecast Dispersion, Analyst Forecast Accuracy, XBRL

JEL Classification: M41, G10, G14

Suggested Citation

Caylor, Marcus L. and Chambers, Dennis J. and Mutlu, Sunay, Financial Reporting Uniformity: Its Relation to Comparability and Its Impact on Financial Statement Users (March 21, 2022). Journal of Business Finance & Accounting, forthcoming, Available at SSRN: https://ssrn.com/abstract=3221183 or http://dx.doi.org/10.2139/ssrn.3221183

Marcus L. Caylor

Kennesaw State University ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Dennis J. Chambers

Kennesaw State University ( email )

560 Parliament Garden Way
MD #0402
Kennesaw, GA 30144
United States
470-578-6375 (Phone)
470-578-9018 (Fax)

Sunay Mutlu (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

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