The Impact of Recognition Versus Disclosure on Financial Information: A Preparer's Perspective
We investigate whether recognition on the face of the financial statements versus disclosure in the footnotes influences the amount that financial managers report for a contingent liability. Using an experiment with corporate controllers and chief financial officers, we find that financial managers...
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| Veröffentlicht in: | Journal of accounting research 2014-06, Vol.52 (3), p.671-701 |
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| container_end_page | 701 |
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| container_title | Journal of accounting research |
| container_volume | 52 |
| creator | CLOR-PROELL, SHANA M. MAINES, LAUREEN A. |
| description | We investigate whether recognition on the face of the financial statements versus disclosure in the footnotes influences the amount that financial managers report for a contingent liability. Using an experiment with corporate controllers and chief financial officers, we find that financial managers in public companies expend more cognitive effort and exhibit less strategic bias under recognition than disclosure. This difference appears to be associated with capital market pressures experienced by public company managers as we find that both the cognitive effort and bias exhibited by private company managers are unaffected by placement. As a result, public company managers make higher liability estimates for recognized versus disclosed liabilities. Their liability estimates are similar to those of private company managers for recognition but lower than private company managers' estimates for disclosure. Our results have implications for auditors and financial statement users in evaluating recognized versus disclosed information for public and private companies. |
| doi_str_mv | 10.1111/1475-679X.12053 |
| format | Article |
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Using an experiment with corporate controllers and chief financial officers, we find that financial managers in public companies expend more cognitive effort and exhibit less strategic bias under recognition than disclosure. This difference appears to be associated with capital market pressures experienced by public company managers as we find that both the cognitive effort and bias exhibited by private company managers are unaffected by placement. As a result, public company managers make higher liability estimates for recognized versus disclosed liabilities. Their liability estimates are similar to those of private company managers for recognition but lower than private company managers' estimates for disclosure. 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Our results have implications for auditors and financial statement users in evaluating recognized versus disclosed information for public and private companies.</description><subject>Accounting research</subject><subject>Business entities</subject><subject>Capital market</subject><subject>Contingent liabilities</subject><subject>Corporate liability</subject><subject>Disclosure</subject><subject>Estimation bias</subject><subject>FASB standards</subject><subject>Financial information</subject><subject>Financial liabilities</subject><subject>Financial management</subject><subject>Financial statements</subject><subject>Liability</subject><subject>Liability management</subject><subject>Managers</subject><subject>Private life</subject><subject>Public companies</subject><subject>Studies</subject><issn>0021-8456</issn><issn>1475-679X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2014</creationdate><recordtype>article</recordtype><recordid>eNqFkE1P3DAQhq2qSN1Cz5yQLPVQLgF_Jk5vC5RlESoIQYs4YHnNBLxk42AnBf49XkL30EvnYmnmeUbjF6FNSnZoql0qCpnlRXm1QxmR_AMarTof0YgQRjMlZP4JfY5xTggpJacjdHNxD3i6aI3tsK_wOVh_17jO-Qb_ghD7iA9ctLWPfQCcmoeuMY11psbTpvJhYZbodzzGZwFaEyB8i_gsiS3Yzv2BDbRWmTrCl_d3HV0e_rjYP8pOTifT_fFJZqWSPJuVVhbAFS_AsgJkMbNM3VpCC1EqUglCrTSsEmbGc1EyYkxJuTJG0VtJc57zdbQ97G2Df-whdnqRzoa6Ng34PmoqmVKFIjlP6Nd_0LnvQ5OuSxQtmUglE7U7UDb4GANUug1uYcKLpkQv89bLdPUyXf2WdzLywXhyNbz8D9fHp-Pzv-LWIM5j58NKZEJSxd7-lg1zFzt4Xs1NeEj7eNr6--dE703U9fHk4EoL_goB-pna</recordid><startdate>201406</startdate><enddate>201406</enddate><creator>CLOR-PROELL, SHANA M.</creator><creator>MAINES, LAUREEN A.</creator><general>Blackwell Publishing Ltd</general><general>Wiley Subscription Services</general><scope>BSCLL</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>201406</creationdate><title>The Impact of Recognition Versus Disclosure on Financial Information: A Preparer's Perspective</title><author>CLOR-PROELL, SHANA M. ; MAINES, LAUREEN A.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c5853-b9c57e3837ec27e57bc28dc0174980f401c5a2f4ab364920aa9138aa81d516363</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2014</creationdate><topic>Accounting research</topic><topic>Business entities</topic><topic>Capital market</topic><topic>Contingent liabilities</topic><topic>Corporate liability</topic><topic>Disclosure</topic><topic>Estimation bias</topic><topic>FASB standards</topic><topic>Financial information</topic><topic>Financial liabilities</topic><topic>Financial management</topic><topic>Financial statements</topic><topic>Liability</topic><topic>Liability management</topic><topic>Managers</topic><topic>Private life</topic><topic>Public companies</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>CLOR-PROELL, SHANA M.</creatorcontrib><creatorcontrib>MAINES, LAUREEN A.</creatorcontrib><collection>Istex</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of accounting research</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>CLOR-PROELL, SHANA M.</au><au>MAINES, LAUREEN A.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>The Impact of Recognition Versus Disclosure on Financial Information: A Preparer's Perspective</atitle><jtitle>Journal of accounting research</jtitle><addtitle>Journal of Accounting Research</addtitle><date>2014-06</date><risdate>2014</risdate><volume>52</volume><issue>3</issue><spage>671</spage><epage>701</epage><pages>671-701</pages><issn>0021-8456</issn><eissn>1475-679X</eissn><coden>JACRBR</coden><abstract>We investigate whether recognition on the face of the financial statements versus disclosure in the footnotes influences the amount that financial managers report for a contingent liability. Using an experiment with corporate controllers and chief financial officers, we find that financial managers in public companies expend more cognitive effort and exhibit less strategic bias under recognition than disclosure. This difference appears to be associated with capital market pressures experienced by public company managers as we find that both the cognitive effort and bias exhibited by private company managers are unaffected by placement. As a result, public company managers make higher liability estimates for recognized versus disclosed liabilities. Their liability estimates are similar to those of private company managers for recognition but lower than private company managers' estimates for disclosure. 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| ispartof | Journal of accounting research, 2014-06, Vol.52 (3), p.671-701 |
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| source | Access via Wiley Online Library; JSTOR Archive Collection A-Z Listing |
| subjects | Accounting research Business entities Capital market Contingent liabilities Corporate liability Disclosure Estimation bias FASB standards Financial information Financial liabilities Financial management Financial statements Liability Liability management Managers Private life Public companies Studies |
| title | The Impact of Recognition Versus Disclosure on Financial Information: A Preparer's Perspective |
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