A Critical Look Ahead : The (limited) Usefulness of Critical Accounting Policies for the Identification of Measurement Uncertainties

Titelangaben

Rupertus, Hendrik ; Bravidor, Marcus:
A Critical Look Ahead : The (limited) Usefulness of Critical Accounting Policies for the Identification of Measurement Uncertainties.
2018
Veranstaltung: 41. European Accounting Association Annual Congress , 30.05.2018-01.06.2018 , Mailand, Italien.
(Veranstaltungsbeitrag: Kongress/Konferenz/Symposium/Tagung , Vortrag )

Weitere URLs

Abstract

Increasing business complexity and the use of highly subjective future-orientated estimation mod-els amplify concerns in communicating uncertain business transactions and estimates. Since 2001, U.S.-firms are encouraged to disclose their highly uncertain accounting policies with a material impact on the presentation of the financial condition of the firm (critical accounting policies, CAP). The aim of this study is to examine whether CAP disclosures mitigate measurement error in the estimation of future economic outcomes. Based on our results, we find that measurement uncertainties have heterogeneous and firm-specific effects of the prediction of future outcomes. Particularly, we find that uncertain accrual components are not useful for predicting future cash flows per-se; but dependent on the importance and the specificity for a given firm.