Journal article
The proposed elimination of full cost accounting in the extractive petroleum industry. An empirical assessment of the market consequences
Journal of accounting & economics, Vol.1(1), pp.3-44
1979
DOI: 10.1016/0165-4101(79)90013-2
Abstract
On July 15, 1977, the Financial Accounting Standards Board (FASB) issued an Exposure Draft of Statement 19 in which a proposal was set forth to establish the uniform usage of successful efforts accounting and to eliminate full cost accounting in the extractive petroleum industry. This study addresses the question of whether the proposed elimination of full cost accounting had an adverse effect on the security returns of full cost versus successful efforts firms. The evidence presented in this study suggests that the proposal to eliminate full cost accounting was associated with a significant negative difference in risk-adjusted rates between full cost firms and successful efforts firms whose financial reports remained unaffected by the proposed change. This observed difference was found to be sustained over an eight month period including confirming events and disclosures associated with the initial proposal. We do not attribute this difference to market inefficiencies but, rather, to the anticipated consequences which this mandated accounting change is likely to have on managerial behavior and to increased costs that will have to be borne by the affected companies. © 1979.
Details
- Title: Subtitle
- The proposed elimination of full cost accounting in the extractive petroleum industry. An empirical assessment of the market consequences
- Creators
- Daniel W. Collins - University of IowaWarren T. Dent - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of accounting & economics, Vol.1(1), pp.3-44
- DOI
- 10.1016/0165-4101(79)90013-2
- ISSN
- 0165-4101
- eISSN
- 1879-1980
- Number of pages
- 42
- Language
- English
- Date published
- 1979
- Academic Unit
- Accounting
- Record Identifier
- 9984963046902771
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