Security market effects associated with SFAS No. 94 concerning consolidation policy

Article Abstract:

An effect of implementing the Financial Accounting Standard Board's Statement of Financial Accounting Standards (SFAS) No. 94, which requires consolidation of all majority-owned subsidiaries as well as those of mixed operations and with large minority interests, is that components of financial statements aside from stockholders' equity and net income will be different from those that would have been reported as if the standard did not apply. In a sample, 72 firms were analyzed to examine the reaction of the security market to the issuance of SFAS 94 requiring consolidation of finance subsidiaries. It was found that it was linked to significant negative excess stock returns and that no meaningful positive excess returns were had for nonconvertible debt securities of companies that did not consolidate before SFAS 94.

Analysis, Taxation, Laws, regulations and rules, Acquisitions and mergers, Surveys, Securities industry, Consolidated tax returns

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Rate-regulated enterprises and mandated accounting changes: the case of electric utilities and post-retirement benefits other than pensions (SFAS No. 106)

Article Abstract:

Electric utilities that are more uncertain about their ability to recover costs in future rates are more motivated to choose cost-inflating assumptions and refrain from benefit plan amendments to avoid greater current cash inflows. This was gleaned from an analysis of electric utility responses to mandated accounting changes, specifically Statement of Financial Accounting Standards (SFAS) No 106, in a rate-regulated industry. Results indicated that rate-regulated firms have a greater tendency to use discretionary choices such as cost-inflating SFAS No 106 assumptions and retiree health care plan reductions, to enhance the current financial statement impact of the accounting standard.

Electric Utilities, Electric Power Generation, Transmission and Distribution, Regulation and Administration of Communications, Electric, Gas, and Other Utilities, Electric services, Regulation, Licensing, and Inspection of Miscellaneous Commercial Sectors, Electric Utility Sales & Rates, Accounting Services Regulation, Research, Accounting and auditing, Accounting services, Rate regulation, Accounting law

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