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The effects of foreign‐currency translation accounting on security analysts' forecasts
Author(s) -
Castanias Richard P.,
Griffin Paul A.
Publication year - 1986
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090070103
Subject(s) - financial statement , accounting , earnings , currency , statement (logic) , sample (material) , business , financial accounting , financial statement analysis , economics , accounting information system , financial ratio , monetary economics , audit , political science , law , chemistry , chromatography
This paper examines certain initial effects on security analysts' forecasts of earnings per share that resulted from the December 1981 change in the Financial Accounting Standards Board rules for foreign‐currency accounting and reporting from Statement 8 to Statement 52. The results show that, relative to a non‐Statement 52 control sample, analysts were more uncertain about future earnings when Statement 52 was initially adopted by the FASB or implemented by companies, and that analysis revised their forecasts more frequently during those periods. The revisions of analysts were positively correlated with the magnitude of the impact of the new standard on company earnings.