A Real Effects Perspective to Accounting Measurement and Disclosure: Implications and Insights for Future Research

Chandra Kanodia, Haresh Sapra

Research output: Contribution to journalArticle

34 Scopus citations

Abstract

Accounting measurement and disclosure rules have a significant impact on the real decisions that firms make. In this essay, we provide an analytical framework to illustrate how such real effects arise. Using this framework, we examine three specific measurement issues that remain controversial: (1) How does the measurement of investments affect a firm's investment efficiency? (2) How does the measurement and disclosure of a firm's derivative transactions affect a firm's choice of intrinsic risk exposures, risk management strategy, and the incentive to speculate? (3) How could marking-to-market the asset portfolios of financial institutions generate procyclical real effects? We draw upon these real effects studies to generate sharper and novel insights that we believe are useful not only for the development of accounting standards, but also for guiding future empirical research.

Original languageEnglish (US)
Pages (from-to)623-676
Number of pages54
JournalJournal of Accounting Research
Volume54
Issue number2
DOIs
StatePublished - May 1 2016

Keywords

  • Accounting measurement
  • Accounting standards
  • Disclosure
  • Economic efficiency
  • Price efficiency
  • Real effects
  • Transparency

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