American Accounting Association 2006 Midwest Region Meeting March 30 – April 1 Chicago, Illinois

Friday, March 31, 10:20 a.m.-12:00 noon
Concurrent session 2B - Business Combinations (Financial Accounting and Reporting)

Title: The Effect of SFAS No. 141 on the Transparency of Business Combination Reporting: Evidence from the Initial Year of Implementation

Natalia Mintchik University of Missouri-St. Louis

ABSTRACT: This study examines the impact of SFAS No.141 on business combination reporting. Specifically, I predict smaller analysts’ earnings forecast errors as a result of elimination of pooling and more informative disclosures for merging firms after the adoption of SFAS No. 141. I restrict my post-SFAS 141 sample to the initial year of SFAS 141 implementation. Such research design provides the unique opportunity to disentangle effects of SFAS No. 141 from simultaneously adopted SFAS No. 142 due to specific accounting treatment for goodwill impairment during this period. Overall, results from this study are consistent with expectations and provide evidence that SFAS No. 141 increased financial reporting transparency after mergers. However, this improvement in financial reporting transparency more likely follows from the extended disclosure requirements and the other required changes in purchase method than from the longly debated elimination of pooling.

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