An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Sasson Bar - Yosef
The Hebrew University -- Rutgers University

Itzhak Venezia
The Hebrew University

Abstract: This paper analyzes whether the new segment reporting rules, SFAS 131, and its international equivalent, the revised IAS 14, will actually help capital market participants obtain more predictive ability than the previous rules. For this we conducted three experiments. Two experiments with advanced accounting students as subjects, where the experiments differed in the firm the subjects analyzed, and the third with professional financial analysts. In each experiment we provided one group of subjects with accounting reports of a firm based on the new standards and another group with reports based on the old standards. We asked both groups to forecast several accounting and market values of the firm, and to report on the variables they considered important in their analysis. We then compared the accuracies of the predictions and the reports of the two groups. Most of the forecasts based on the new rules were neither significantly different from those based on the former one

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