Implications of Proposed New Revenue Guidelines for Quality of Earnings Analyses.

摘要

Consequential effects of new revenue guidelines proposed jointly by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) for company valuation models are largely unexplored in scholarship and in practice, despite their potential significant bearing on target prices and, therefore, on capital allocation decisions made by investors. The purpose of this grounded theory study was to explore potential relationships between revenue accounting guidelines and assessments of earnings quality used in valuation. Valuation concepts and financial reporting theory framed the study. Interviews with five equity analysts from leading financial institutions were conducted to identify which existing or proposed revenue accounting guidelines the financial analyst community might reject and adjust for in their assessments of earnings quality. Manual coding was applied to the interview data to assess the level of agreement with proposed changes versus current guidelines, to assess how sensitive interviewees were to a particular accounting requirement or a change thereto, and to understand the reasons for such sensitivity. Data analysis revealed a significant level of disagreement with a number of proposed changes, particularly in areas affecting financial statement presentation that interviewees seemed sensitive to. Lack of conservatism and reduced consistency and comparability in application were noted as major concerns triggering adjustments. Implications for positive social change include benefits for analysts and for society overall. Analysts can benefit from this study's findings to improve their valuation models. Valuation models of higher predictive value reduce stock price volatility. Less stock price volatility benefits society because it preserves the wealth of investors and thus encourages savings and economic growth.