International Advances in Economic Research

, Volume 1, Issue 4, pp 426–430 | Cite as

Earnings management by the early adopters of SFAS No. 106

  • James A. Smith
  • Zabihollah Rezaee
Articles
  • 36 Downloads

Abstract

Statement of Financial Accounting Standard (SFAS) No. 106 on Nonpension Postretirement Benefits (NPB) provides managers with a relatively long adoption window and choice of transition methods which can be used by affected companies to manage earnings. This paper examines whether management's choice of adoption timing is motivated by the desire to manage earnings. Fisher's [1934] exact probability analysis is used to test the hypothesis regarding profitability of a sample of 200 early and late adopters of SFAS No. 106. The results indicate that the profitability of adopting the income-reducing accounting standard (SFAS No. 106) early is significantly higher for more profitable firms than for less profitable firms.

Keywords

Economic Growth International Economic Probability Analysis Earning Management Transition Method 

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Copyright information

© Atlantic Economic Society 1995

Authors and Affiliations

  • James A. Smith
    • 1
  • Zabihollah Rezaee
    • 1
  1. 1.St. Cloud State University and Middle Tennessee State UniversityUSA

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