Audit opinion, Abnormal returns, Uncertainty, Subject to opinion

John A. Elliott, J. Douglas Hanna, Repeated Accounting Write-Offs and the Information Content of Earnings, Journal of Accounting Research, Vol. 34, Studies on Recognition, Measurement, and Disclosure Issues in Accounting (1996), pp. 135-155

John A. Elliott, Wayne H. Shaw, Write-Offs As Accounting Procedures to Manage Perceptions, Journal of Accounting Research, Vol. 26, Studies on Management's Ability and Incentives to Affect the Timing and Magnitude of Accounting Accruals (1988), pp. 91-119

SFAS No. 2, R&D, Accounting changes, Firm size

Abstract Examines the information content of announcements of increased reserves for loan loss by Citicorp and other banks, and the later write-off announcement made by the Bank of Boston in 1987. Bank accounting for loan losses; Study of the events surrounding the Citicorp and Bank of Boston announcements; Implication of Citicorp's increase in loan loss reserves.

Abstract Prior studies of the adoption of LIFO, SFAS No. 34, and APBO No. 18 document a significant positive association between security analysts' forecast errors and the current year earnings effect of changes in accounting method. Examination of a sample of largely unstudied and diverse accounting changes, using different sources of forecasts, allows evaluation of the pervasiveness and robustness of these earlier findings. Prior work is extended by considering a variety of voluntary and mandatory changes, the extent of prior disclosure of information regarding the change, the nature of forecast revisions during the year of the change, and by comparing the bias and dispersion of forecasts in change years to that in non-change years. Tests using a firm as its own control in a matched-pairs design control for industry and firm-specific factors. Consistent with prior work, the results of this study suggest that analysts do not fully revise their forecasts for the current year's earnings effect of changes in accounting method. A positive, but generally insignificant, association between forecast errors and the earnings effect of changes is reported. Both forecast errors and the dispersion of forecasts are greater in the year of an accounting change than in non-change years, particularly in the absence of prior information regarding the change. A significant negative association is reported between the revision in analysts' forecasts and the impact of an accounting change on income. This observed relation is consistent with managers adopting accounting changes with an income smoothing motivation.

[Prior studies of the adoption of LIFO, SFAS No. 34, and APBO No. 18 document a significant positive association between security analysts' forecast errors and the current year earnings effect of changes in accounting method. Examination of a sample of largely unstudied and diverse accounting changes, using different sources of forecasts, allows evaluation of the pervasiveness and robustness of these earlier findings. Prior work is extended by considering a variety of voluntary and mandatory changes, the extent of prior disclosure of information regarding the change, the nature of forecast revisions during the year of the change, and by comparing the bias and dispersion of forecasts in change years to that in non-change years. Tests using a firm as its own control in a matched-pairs design control for industry and firm-specific factors. Consistent with prior work, the results of this study suggest that analysts do not fully revise their forecasts for the current year's earnings effect of changes in accounting method. A positive, but generally insignificant, association between forecast errors and the earnings effect of changes is reported. Both forecast errors and the dispersion of forecasts are greater in the year of an accounting change than in non-change years, particularly in the absence of prior information regarding the change. A significant negative association is reported between the revision in analysts' forecasts and the impact of an accounting change on income. This observed relation is consistent with managers adopting accounting changes with an income smoothing motivation.]

Abstract Reviews the book "Financial Accounting: An Introduction to Concepts, Methods, and Uses," by Sidney Davidson, Clyde P. Stickney and Roman L. Weil.

[This article discusses several issues underlying a dispute between Aetna and the SEC about accounting for the tax benefits of loss carryforwards. We discuss current accounting requirements for these benefits, Aetna's accounting for its tax benefits, and the reaction of security markets to its dispute with the SEC. We believe that accounting for these tax benefits should be changed to reflect changes in the tax laws, current definitions of assets, and criteria for accounting recognition.]

Journal Article Schumpeter and Marx on Capitalist Transformation Get access John E. Elliott John E. Elliott University of Southern California Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 98, Issue 2, May 1983, Pages 333–336, https://doi.org/10.2307/1885629 Published: 01 May 1983