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

Abstract

We develop a Compustat-based financial reporting uniformity measure based on the presentation of common financial statement line items. We define uniformity as the average ratio of a firm’s pairwise overlaps of non-missing Compustat data items with peer firms. Emphasizing the conceptual difference between uniformity and comparability, we find that uniformity is positively associated with output-based accounting comparability, and this association is impaired with high R&D intensity and frequent losses. 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 presentational uniformity being related to information processing efficiencies. We partition our uniformity measure into separate income statement and balance sheet components. We find that income statement uniformity is associated with greater analyst coverage, while balance sheet uniformity is associated with higher forecast accuracy and lower forecast dispersion.

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

JEL Classification: M41, G10, G14