Nancy B. Nichols

Assessing the Acceptability of International Accounting Standards in the US: An Empirical Study of the Materiality of US GAAP Reconciliations by Non-US Companies Complying with IASC Standards

Abstract With the International Accounting Standards Committee (IASC) reaching the completion of its core standards program, the International Organization of Securities Commissions (IOSCO) is considering its response to the IASCs application for endorsement of International Accounting Standards (IASs). A critical aspect of IOSCOs acceptance of IASs is likely to be the extent to which such standards are compatible with US Generally Accepted Accounting Principles (US GAAP). This issue is explored by an empirical study of US GAAP reconciliations by non-US companies complying with IASC standards. The results indicate that the impact of accounting differences between IASs and US GAAP is narrowing and suggest that the Securities Exchange Commission (SEC) should consider accepting IASC standards without condition. Alternatively, an SEC endorsement could include a short list of IASs where acceptance is subject to additional disclosures.

A Further Examination of Income Shifting Through Transfer Pricing Considering Firm Size and/or Distress

Abstract This study evaluates the effect of firm size on income shifting between tax jurisdictions through the use of transfer prices both before and after the passage of the Tax Reform Act of 1986 (TRA86). Prior research addressing income shifting through transfer pricing analyzes larger, financially sound firms. This empirical study extends the transfer pricing literature by including smaller and in some cases financially distressed firms in the sample and testing the effect by firm size on income shifting. Our findings suggest that smaller and/or distressed firms are less likely to shift income through transfer pricing than larger firms.

LOB and geographic segment disclosures: an analysis of the impact of IAS 14 revised

Abstract To better satisfy important information needs of users of financial statements, as set forth in the IASC Framework , the IASC issued IAS 14 revised (IAS 14R), Segment Reporting , in 1997. IAS 14R became effective for fiscal years beginning on or after July 1, 1998. This research examines the pre-IAS 14R and post-IAS 14R line of business (LOB) and geographic disclosures of a global sample of companies that refer to IAS to ascertain the impact and effectiveness of IAS 14R in practice. Specifically, this research considers whether the new requirements resulted in (1) a greater number of LOB segments for some enterprises, particularly those that previously claimed to operate in one LOB, (2) more meaningful, transparent geographic groupings, as opposed to the vague groupings associated with the original version of IAS 14, (3) companies reporting more items of information about each LOB and/or geographic segment, and (4) improved consistency of primary segment information with other parts of the annual report. Additionally, the research examines the extent to which IAS companies provided voluntary segment disclosures and suggests some problems associated with compliance. The findings indicate IAS 14R resulted in a significant increase in the number of items of information disclosed for each primary and secondary segment. Additionally, the consistency of segment information with introductory annual report material increased significantly and the number of companies claiming to operate in one LOB declined significantly. On a less positive note, the results reveal that many companies continued to utilize broad, vague geographic groupings. And, a significant minority continued to report segment information on a basis inconsistent with other sections of the annual report. The research also identified several instances where it appears companies may not be fully complying with the all the new disclosure guidelines. As the IASB’s new work program includes a convergence project on segmental reporting, recommendations are made regarding possible modifications to IAS 14R.

Geographic segment disclosures in the United States: reporting practices enter a new era

Abstract The promulgation by the FASB of SFAS 131, Disclosures about Segments of an Enterprise and Related Information, in 1997 (FASB, 1997) (effective 1998) heralded a new era of segment reporting in the United States. The purpose of this paper is to assess the impact and effectiveness of the new standard with reference to geographic segment disclosures. Given the criticisms of its predecessor, SFAS 14, relating to segment identification and the consistency of internal and external reporting, the key issue is the extent to which companies have responded to the changes in geographic information disclosures required by SFAS 131. An empirical study of the 1997 and 1998 annual reports of US Global 1000 companies reveals mixed results. While more country specific data is disclosed and the consistency of disclosures with other parts of the annual report is increased, the problem of reporting highly aggregated geographic areas remains for a significant group of companies.

Pro Forma Adjustments to GAAP Earnings: Bias, Materiality, and SEC Action

ABSTRACT The Securities and Exchange Commission (SEC) issued Regulation G (implementing Section 401 (b) of the Sarbanes-Oxley Act of 2002) in 2003 subsequent to its warning in December 2001 about reporting misleading non-GAAP or pro forma results. This research provides a longitudinal analysis of the earnings releases of a sample of companies reporting pro forma results from 1999 through 2004, especially in the context of recent SEC action. The research examines (1) the specific items included in pro forma adjustments and their frequency, (2) the extent of materiality or magnitude of the adjustments compared to GAAP, and (3) the stated rationale for the adjustments. The research also specifically addresses the impact of the SECs recent guidance and the extent to which Regulation G has modified pro forma reporting behavior. Our findings indicate pro forma adjustments have continued to be systematically biased in recent years to show significantly higher earnings compared to GAAP earnings and that the magnitude of such differences is highly material. While SEC action, particularly Regulation G, appears to have greatly reduced the number of companies disclosing non-GAAP financial measures and has improved transparency, a significant number of companies continue to make adjustments that are likely of concern to the SEC.

Implementation of Assurance of Learning Plans: An Accounting Program and Individual Course Analysis

The authors surveyed faculty at AACSB-accredited schools regarding the learning goals and measures for their accounting programs as well as course objectives for the introductory tax course. They found over 50% of respondents were still developing their learning goals and measures and only 18% of respondents had completed 2 or more rounds of assessment. Whereas most accounting program goals are assessed with direct measures, accreditation program goals typically represent a small subset of the goals specified by professional bodies such as the AICPA. Assessment results have led to numerous changes in accounting programs and courses.

The New SEC Rules for Money Market Funds: Financial Reporting and Tax Consequences

In this article, the authors explain the new Securities and Exchange Commission (SEC) rules for money market mutual funds (MMFs), which are designed to improve their transparency and provide investor protection during periods of market stress. With their effective date just over one year away, it is clear that corporate accountants and financial executives need to understand the financial reporting and tax implications so that any changes needed to accounting and tax systems can be implemented in a timely manner.