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Non-discretionary conservatism: evidence and implications

Journal

Journal of Accounting and Economics

Subject

Accounting

Publishing details

Journal of Accounting and Economics 2013 Vol 56:2-3 p 112-133

Authors / Editors

Lawrence A;Sloan R;Sun Y

Biographies

Alastair Lawrence

Publication Year

2013

Abstract

A large body of accounting research finds that various contracting incentives lead managers to engage in conservative accounting practices. We extend existing research by modeling the impact of extant accounting rules on conservative accounting. Accounting rules typically require assets to be written down when their fair values drop sufficiently below their book values. We document evidence of the resulting non-discretionary conservatism and show that it appears to explain some of the results from previous research on contracting incentives.

Keywords

Non-discretionary conservatism; Conditional conservatism; Book-to-market; Asset impairment

Available on ECCH

No


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