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THE REPORTING OF INVESTMENTS IN ASSOCIATED COMPANIES AND CREDIT EVALUATIONS: AN EXPERIMENTAL STUDY
Author(s) -
Wilkins Trevor,
Zimmer Ian
Publication year - 1985
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1985.tb00780.x
Subject(s) - creditor , accounting , business , revenue , affect (linguistics) , accounting information system , actuarial science , finance , debt , linguistics , philosophy
Policymakers have been concerned with the problem of accounting for investments in associated companies. A field experiment was conducted to investigate the effects of alternative methods of recognising revenue from investments in associated companies on creditors' evaluations and decisions. Results indicate that most creditors do not adjust financial statements based on alternative methods of accounting and that different methods of accounting affect credit assessments and decisions. The implications of these findings for policymakers and creditors are discussed.