国際会計研究ジャーナル

概要

The DOW 30s Compliance with the Provisions of SFAS 159 and 157 for Investments in Equity Securities

Veliota Drakopoulou

Although, SFAS 159 has raised the bar for disclosure requirements and improved investors, analysts, and financial statement users understanding of managements’ rationale for implementing the Fair Value Option (FVO) for equity securities, it has been criticized to prospect entities to structure transactions that are intended to lever a specific accounting effect. Companies by appointing the fair value option for underwater investments in certain securities can move those securities from the available-for-sale and held-to-maturity categories into the trading category and record the unrealized losses as an essential portion of the cumulative-effect adjustment to retained earnings without reproducing any losses on the securities in the income statement even if the securities subsequently are sold. This study examines how the thirty companies that comprise the Dow Jones Industrial Average (Dow 30) complied with the provisions of SFAS No. 157 and 159 to record their investments in equity securities. The results indicate that the sample of companies complied with the qualitative guidelines outlined in the pronouncement. A surprising finding was that a large number of the sample companies reported that they don’t currently believe adoption would have a material impact on their consolidated results of operations and financial condition.