The implications of unverifiable fair-value accounting : evidence from the political economy of goodwill accounting
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212628191-MIT.pdf
Description
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5.27 MB
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Checksum (MD5)
3a6c13eb18006c908f3fc0c9e0be9ff2
Author(s)
Ramanna, Karthik
Advisor(s)
Ross L. Watts.
Date Issued
2007
Publisher
Massachusetts Institute of Technology
Abstract
I study the evolution of Statement of Financial Accounting Standard (SFAS) # 142, which uses unverifiable fair-value estimates to account for acquired goodwill. I find evidence consistent with the Financial Accounting Standards Board (FASB) issuing SFAS 142 in response to political pressure over its proposal to abolish pooling accounting: pro-pooling firms can be linked-via political contributions-to U.S. Congresspersons pressuring the FASB on this issue. This result is interesting given the proposal to abolish pooling was due in part to the Securities and Exchange Commission's concerns over pooling misuse. I also find evidence consistent with lobbying support for SFAS 142 increasing in firms' discretion under the standard. Agency theory predicts this unverifiable discretion will be used opportunistically. The results highlight the potential costs of unverifiable fair-value accounting.
Description
Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2007.
Includes bibliographical references (leaves 53-55).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
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