Fair value accounting for commercial banks: an empirical analysis of SFAS No. 107
Article Abstract:
A study is conducted to examine the relationship between the market value of the common equity of banks and fair value estimates revealed under Statement of Financial Accounting Standards No. 107, 'Disclosures about Fair Value of Financial Instruments.' The sample includes the 200 largest US bank holding companies ranked by the Thomson Bank Directory. Results indicate that only the reported fair values of investment securities have increasing explanatory power in terms of book value. Fair values of loans, deposits, long-term debt or net off-balance sheet financial instruments are not found to have any incremental explanatory power. When two competing indicators of value computed through the accrual accounting system are controlled for, the fair value of securities no longer shows a significant relation with market value. Estimation of returns specification likewise do not exhibit significant incremental explanatory power in the fair value estimates.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1996
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SFAS No. 106 and benefit reductions in employer-sponsored retiree health care plans
Article Abstract:
A study was conducted to find out the frequency, magnitude and timing of reductions in retiree health care benefit and to pinpoint the variables affecting decisions to cut benefits. Data were culled from a sample of 202 firms, 71 of which reduced health care benefits and 131 did not. After industry, financial weakness and firm-specific changes in retiree health care costs were controlled for, results showed that benefit reductions were the result of increased contracting cost generated by the financial reporting standards mandated in Statement of Financial Accounting Standard (SFAS) No. 106. However, findings revealed that benefit-reducing firms are financially weaker and have higher retiree health care expenses when benefits are reduced. Thus, SFAS No. 106 is not the the only reason for the reductions.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1995
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