TY - JOUR
T1 - Conditional conservatism in GAAP earnings and the implications for the disclosure of non-GAAP earnings
AU - Ater, Brandon D.
AU - Kilic, Emre
AU - Sobngwi, Christian K.
N1 - Funding Information:
☆ We acknowledge helpful comments and suggestions from Andrew Anabila, Arthur Francia, Jennifer Howard, E. Scott Johnson (discussant), Gerry Lobo, Shiva Sivaramakrishnan, Anup Srivasta (moderator), Joe Zhang, Luo Zuo (discussant), and participants at the 2011 AAA annual meeting, the 2012 meeting of the AAA Southwest Region, and the University of Houston. We thank the C.T. Bauer College of Business at the University of Houston. Brandon Ater acknowledges financial support from the Schlief School of Accountancy and the Rusche College of Business at Stephen F. Austin State University. Brandon Ater and Christian Sobngwi acknowledge financial support from the College of Business and Entrepreneurship at the University of Texas Rio Grande Valley, and The Southwest Region of the American Accounting Association.
Funding Information:
We acknowledge helpful comments and suggestions from Andrew Anabila, Arthur Francia, Jennifer Howard, E. Scott Johnson (discussant), Gerry Lobo, Shiva Sivaramakrishnan, Anup Srivasta (moderator), Joe Zhang, Luo Zuo (discussant), and participants at the 2011 AAA annual meeting, the 2012 meeting of the AAA Southwest Region, and the University of Houston. We thank the C.T. Bauer College of Business at the University of Houston. Brandon Ater acknowledges financial support from the Schlief School of Accountancy and the Rusche College of Business at Stephen F. Austin State University. Brandon Ater and Christian Sobngwi acknowledge financial support from the College of Business and Entrepreneurship at the University of Texas Rio Grande Valley, and The Southwest Region of the American Accounting Association.
Publisher Copyright:
© 2023 Elsevier Ltd
PY - 2023
Y1 - 2023
N2 - This study explores the relationship between the level of conditional conservatism in GAAP earnings and a company's choice to disclose non-GAAP earnings. Conditional conservatism tends to lower GAAP earnings and potentially reduces their information value. However, previous research has shown that non-GAAP earnings are more persistent and informative than GAAP earnings. Therefore, companies may opt to disclose non-GAAP earnings to bypass the constraints imposed by conditional conservatism. The findings support a positive link between the degree of conditional conservatism in GAAP earnings and a company's decision to disclose non-GAAP earnings. Additionally, there is evidence of a positive connection between the extent of conditional conservatism in GAAP earnings and the magnitude and frequency of non-GAAP disclosures.
AB - This study explores the relationship between the level of conditional conservatism in GAAP earnings and a company's choice to disclose non-GAAP earnings. Conditional conservatism tends to lower GAAP earnings and potentially reduces their information value. However, previous research has shown that non-GAAP earnings are more persistent and informative than GAAP earnings. Therefore, companies may opt to disclose non-GAAP earnings to bypass the constraints imposed by conditional conservatism. The findings support a positive link between the degree of conditional conservatism in GAAP earnings and a company's decision to disclose non-GAAP earnings. Additionally, there is evidence of a positive connection between the extent of conditional conservatism in GAAP earnings and the magnitude and frequency of non-GAAP disclosures.
KW - Conditional conservatism
KW - Non-GAAP earnings
KW - Special items
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U2 - 10.1016/j.adiac.2023.100686
DO - 10.1016/j.adiac.2023.100686
M3 - Article
AN - SCOPUS:85168469085
SN - 0882-6110
VL - 66
JO - Advances in Accounting
JF - Advances in Accounting
M1 - 100686
ER -