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

46 Pages Posted: 30 Jul 2018 Last revised: 15 Jun 2021

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: June 15, 2021

Abstract

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 demonstrate that our uniformity measure is positively associated with analyst coverage and analyst forecast accuracy, and negatively associated with analyst forecast dispersion, consistent with financial statement account uniformity being related to information processing efficiencies. 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.

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 (June 15, 2021). 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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