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Further Evidence on the Impact of SFAS 52 on Analysts' Earnings Forecasts
Author(s) -
Ayres Frances L.,
Rodgers Jacci L.
Publication year - 1994
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/j.1467-646x.1994.tb00038.x
Subject(s) - earnings , accounting , economics , econometrics
This study examines the impact of Statement of Financial Accounting Standards Number 52 (SFAS 52) on analysts' earnings forecasts. Value‐Line forecasts of multinational firms' earnings were examined for the years 1979‐1984. Forecast errors did not exhibit a significant linear trend. However, the results show a decline in signed forecast errors from the pre‐SFAS 52 to the post‐SFAS 52 period reflecting a change from an overstatement bias to relatively unbiased forecasts. Overall, the results suggest that (1) overstatement errors were greater in the pre‐SFAS 52 period than in the post SFAS 52 period, and (2) overstatement errors in the year that SFAS 52 was adopted were greater than surrounding years. In addition, a strong negative relation was found between 1981 signed forecast errors and both revisions in forecasts and the income effect of the accounting change.