The Effect of SFAS No. 131 on the Cross-Segment Variability of Profits Reported by Multiple Segment Firms

58 Pages Posted: 23 Aug 2005

See all articles by Michael Ettredge

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Soo Young Kwon

Korea University

David B. Smith

University of Nebraska at Lincoln - School of Accountancy

Mary S. Stone

University of Alabama - Culverhouse College of Commerce & Business Administration

Abstract

Our study assesses whether SFAS No. 131 improved disclosure about the diversity of multiple segment firms' operations. We find a post-SFAS No. 131 increase in cross-segment variability of segment profits, an increase in the association between reported and inherent cross-segment variability, and an increase in association between reported variability and capital market incentives to disclose. We interpret the results as evidence that SFAS No. 131 increased the transparency of segment profitability disclosures, and as indicating SFAS No. 131 allowed firms depending more on external financing to disclose more about differences in segment profitability.

Keywords: Segment reporting, SFAS No. 131, transparency, proprietary costs

JEL Classification: M41, M44, M45, D21, D78

Suggested Citation

Ettredge, Michael L. and Kwon, Soo Young and Smith, David B. and Stone, Mary S., The Effect of SFAS No. 131 on the Cross-Segment Variability of Profits Reported by Multiple Segment Firms. Review of Accounting Studies, Vol. 11, No. 1, March 2006. Available at SSRN: https://ssrn.com/abstract=784004

Michael L. Ettredge (Contact Author)

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7537 (Phone)
785-864-5328 (Fax)

Soo Young Kwon

Korea University ( email )

#613 LG-POSCO Hall
145 Anamro, Seongbuk-Gu
Seoul, 136-701
Korea, Republic of (South Korea)
82232901937 (Phone)

David B. Smith

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Mary S. Stone

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Box 870223
School of Accountancy 314 Alston Hall
Tuscaloosa, AL 35487-0223
United States
205-348-2915 (Phone)
205-348-8453 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
326
Abstract Views
2,011
rank
94,179
PlumX Metrics