recent research in information systems using XBRL shows that there are huge differences between what are reported in GAAP financial statements and what Compustat captures even after making adjustments. See some interesting forthcoming research in JIS that exploits the fact that mandated XBRL filings have existed for US public companies since 2011!
Yet an entire mini- industry has grown up around comparing non- GAAP numbers in earnings press releases and GAAP as captured by Computstat! Yet investors are comparing these non- GAAP to real GAAP numbers NOT Computstat GAAP! Indeed most capital markets research is based not on the GAAP numbers investors have but rather what we are now learning are pretty different C- GAAP numbers.
What does all this mean for market efficiency studies? functional fixation studies? accruals?
I have no clue but it seems to me that a lot of things that we think we know about how investors use GAAP numbers need to be revisited given what we have been researching for a long time are C-GAAP numbers which we now have clear evidence are NOT the same thing! Indeed, I expect that the vast majority of accounting studies since the early 1970’s are about c-GAAP not GAAP!
I recall being laughed at when I raised this question 20 years ago and was told that the adults knew better! Maybe they didn’t! Wouldn’t that be funny!
On my sabbatical travels I asked for a host for a few days in Europe prior to the EAA Congress.
I want to thank the good folks at VU university in Amsterdam for inviting me to visit.
While there I will be presenting the “craft of accounting research – international edition” as well as a working paper about evaluating field research!
Then onto the EAA PhD forum in Glasgow!
As noted in a previous post I was able to attend both the Auditing Mid Year Meeting and the Management Accounting Conference in January held in Miami and Irvine (just outside of LA) respectively.
It was very encouraging to see at both meetings that the number of field studies using qualitative data was approaching, if not in, the double figures. Furthermore, it was encouraging to see the number of US based academics that were undertaking field research – many of them for the first time.
It was also fun to see that my research and textbook writing partner, Robert Knechel, who had earlier received the Outstanding Audit Educator Award, presenting a field study that he and two co-authors (Carlin Dowling and Robyn Moroney) from Australia had done on audit partners about the effects of the Australian regulator’s inspections of Big N and international firms. This was Robert’s first time in presenting such a field study and it was fun to see him a bit nervous (those of you who know Robert know he is one of the most self-assured members of our profession without being arrogant (albeit some would argue that characterization) 🙂 ) but he did a fine job.
Furthermore, Jeff Cohen (Senior Editor of AJPT) let the “cat out of the bag” (what a cat is doing in a bag in the first place is a mystery to me – but I digress) letting those attending the Annual Section Meeting (i.e. the beer and wine meeting) that he had approached me about writing a paper on field research quality – a paper targeted at new to field research people and editors/ reviewers who might be called upon to edit or review such research even if they had not done it yet given the paucity of field researchers in North America. Myself and my colleague, Bertrand Malsch, then had to quickly get to work polishing the paper that we had been working on for several months as shortly after that announcement my mailbox was full of email asking for a copy of this then “not ready for prime time” working paper.
It was during this rush of interest that I learned of several doctoral students at major US state universities that are undertaking field research as part of their dissertation projects! Furthermore, Robert drafted me around this time to given a seminar on field research to doctoral students at Florida (an overload course from their perspective). The vast majority of these students responded well to the initiative and were exceedingly well prepared for the first three hour seminar. Yet the room was 9/10 archival researchers, 1/10 experimental.
So it is away too early to claim any victory but signs of a dawning of understanding are definitely in the offing. Yet us hope that this is not a “false dawn” but the start of a commitment to intellectual openness that accounting research in many parts of the world so desperately needs.