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The implementation effects of expanded consolidation: the case of consolidating special purpose entities
Author(s) -
Luo Ting,
Warfield Terry
Publication year - 2014
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12004
Subject(s) - consolidation (business) , restructuring , accounting , earnings , incentive , business , fin , finance , economics , microeconomics , materials science , composite material
This article examines the impact of FASB I nterpretation N o. 46 ( R evised ), FIN 46( R ), on perceived earnings informativeness of companies with special purpose entities ( SPE s). We find that the impact depends on the pre‐ FIN 46( R ) incentives for using SPE s. The implementation of FIN 46( R ) improves perceived earnings informativeness of companies that previously used SPE s less for the manipulation of financial reporting, but does not generate the same improvement for those otherwise. Furthermore, these differential effects are more pronounced when companies reacted to FIN 46( R ) by restructuring their SPE s to keep them off financial statements.