Journal article
Materiality Decisions and the Correction of Accounting Errors
The Accounting review, Vol.84(3), pp.659-688
05/01/2009
DOI: 10.2308/accr.2009.84.3.659
Abstract
We test conjectures about the determinants of materiality judgments by examining a financial reporting choice made by firms that discover errors in prior years' financial statements. From late 2004 to mid-2006, more than 250 U.S. firms uncovered and corrected operating lease accounting errors either by formal restatement-required for errors deemed material-or by a less visible current-period "catch-up" adjustment. We test the role of materiality considerations outlined in SAB No. 99 as well as factors outside authoritative guidance in explaining the correction method chosen. Although both quantitative and qualitative materiality considerations cited in the guidance explain a large portion of the variation in firms' error correction decisions, we find that the prior actions of other firms also appear to play a major role. We also find that clerical considerations, but not strategic disclosure concerns, help explain cross-sectional variation in the timing of firms' error correction announcements.
Details
- Title: Subtitle
- Materiality Decisions and the Correction of Accounting Errors
- Creators
- Andrew A. Acito - University of IowaJeffrey J. Burks - University of Notre DameW. Bruce Johnson - University of Iowa
- Resource Type
- Journal article
- Publication Details
- The Accounting review, Vol.84(3), pp.659-688
- DOI
- 10.2308/accr.2009.84.3.659
- ISSN
- 0001-4826
- eISSN
- 1558-7967
- Publisher
- Amer Accounting Assoc
- Number of pages
- 30
- Language
- English
- Date published
- 05/01/2009
- Academic Unit
- Accounting
- Record Identifier
- 9984962891002771
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