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Examining the Effects of Fair Value Measurements on Financial Reporting Quality and the Cost of Equity

Sat, April 18, 9:05 to 10:45am, Renaissance Asheville Hotel, TBA

Abstract

This study examines whether the implementation of FASB Accounting Standards Codification on Fair Value Measurements (ASC 820-10) improves financial reporting quality and the cost of equity capital. ASC 820-10 was designed and implemented under the premise that it would improve financial reporting quality and comparability of fair value measurements in financial reports. However, anecdotal evidence suggests managers believe this requirement is “too onerous, operationally challenging, and would not provide useful information.” Initial results indicate that ASC 820-10 did improve financial reporting quality for all firms; however, the increased disclosure had the most significant impact for firms with poorer informational environments.

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