The implementation effects of expanded consolidation: the case of consolidating special purpose entities

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.