Securities And Exchange Commission Registrants Research Articles

Demystifying Disclosure Controls: Understanding Them to Effectively Leverage Toward Objectives

All organizations are subject to some degree of disclosure requirements, which are also commonly called external reporting requirements. They can be as simple as filing tax returns or as complex as meeting applicable rules and regulations of a governmental regulator, such as the U.S. Securities and Exchange Commission (SEC). No matter the extent, organizations are well advised to have robust disclosure controls in place to help ensure that external disclosures are prepared and delivered in accordance with the applicable external reporting requirements. While the article tackles disclosure controls mostly from SEC's definition, it also has ideas for entities not subject to SEC rules and regulations since this is a topic that applies to all types of organizations. It is essential to complete disclosures in an accurate, timely and complete manner to protect against adverse legal actions and to preserve the organization's reputation. The interests of stakeholder groups such as governments, creditors and regulators are essential to the success of any business and ignoring or under-resourcing their requirements is a recipe for disaster that can be averted through appropriate disclosure controls.

SEC Division of Corporation Finance Monitoring and CEO Power

SUMMARYSection 408 requires the Securities and Exchange Commission (SEC) to review the filings of all SEC registrants every three years. Our study investigates this SEC monitoring role and differs from past SEC research by focusing on the SEC Division of Corporation Finance (DCF) rather than the Division of Enforcement and specifically on DCF's “review and comment” monitoring role. We rely on past theoretical research in management, finance, and accounting that provides us with arguments suggesting the DCF may target companies with strong CEOs and weak monitoring. Our findings cast light on the power struggle between the board and CEO by suggesting that the CEO's influence over the board may adversely affect board oversight. In addition, our results indicate that the DCF-prompted restatements lead companies to re-evaluate their governance structure.

Effect of SEC’s Proposed Short-term Borrowing Disclosure Regulation on U.S. Stock Prices

This study examines the market reaction to proposed short-term borrowing disclosure regulations and documents a positive market reaction, indicating the usefulness of the disclosure from the vantage point of investors. The 2008 financial crisis, triggered in part by excessive bank borrowing, led to the failure of a number of major financial institutions, including one U.S. investment bank, Lehman Brothers. Investigating the reasons for Lehman’s failure, the bankruptcy examiner determined in March 2010 that the bank had improperly moved $50 billion off its balance sheet by misclassifying short-term trades as sales. This, and similar window-dressing at other major banks, precipitated a Securities and Exchange Commission (SEC) inquiry. In April 2010, the SEC informed Congress that it was considering new rules to discourage financial firms from reducing borrowing in anticipation of their quarter-end reports. Subsequently, in September 2010, the SEC unanimously voted for a proposed “Short-Term Borrowing Disclosure Rule” requiring additional quantitative and qualitative disclosure about short-term borrowing, with the primary objective of improving investors’ understanding of reported amounts of short-term borrowing. The rule would apply to all SEC registrants, with most disclosure required of Int Adv Econ Res (2012) 18:461–463 DOI 10.1007/s11294-012-9371-2

Demonstrating Reasonable Certainty Under Principles-Based Oil and Gas Reserves Regulations

Summary Historically, oil and gas reserves definitions have included the term "reasonable certainty" when describing the standard of high confidence/low uncertainty for a conservative estimate of future recovery from an accumulation. In 2008, the US Securities and Exchange Commission (SEC), one source for such definitions and regulations, changed its rules on oil and gas reserves and moved from a more rules-based approach to a more principles-based approach. While the SEC regulations both before and after this change incorporated the term "reasonable certainty," the philosophical change from rules-based to principles-based regulation puts more responsibility on the reserves evaluator to understand the uncertainties in the reserves estimation and to "get it right." This paper examines the stated definition of reasonable certainty as well as the effective definition based on how the regulations were interpreted under the prior rules-based system. Examples of prior methods of regulatory controls, under a rules-based system, that no longer fit under a principles-based system are noted. The paper then examines the current definition. The overprint of a principles-based regulatory system must be considered to understand how such an approach will impact the effective definition under the current rules. The insights from the financial and legal communities are examined for their learnings in which other forms of regulations underwent this same philosophical change. This examination describes how rules-based systems are more "input control" focused, while principles-based systems focus more on "outcomes." Next, the paper suggests how the reserves evaluator should apply this understanding of the new principles-based rules. The evaluator is now more responsible to understand the range of uncertainty in reserves estimates and to ensure that the outcome (the proved reserves estimate) satisfies the regulations. Also, the paper discusses key tests to demonstrate that the correct outcome— a reasonably certain volume—has been achieved. After 30 years of well-established practices, the responsible reserves evaluator has examined changes as they evolved in then-current regulation text. Now, the evaluator needs to additionally consider changes based on the implications of principles-based regulations.

Integrating Reserves Management: Providing Regulatory Compliance and Improving Decision Making

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 124168, "Methodology for Integrated Reserves Management: Providing Regulatory Compliance and Im proving Decision Making," by Lev Virine, SPE, Project Decisions, and Doug MacDonald, SPE, Schlumberger Information Solutions, prepared for the 2009 SPE Annual Technical Conference and Exhibition, New Orleans, 4-7 October. The paper has not been peer reviewed. Effective corporate reserves-management systems enable tracking reserves to provide input for reporting to regulators and to serve as a decision-support system. Implementation of such reserves-management systems has challenges. Regulatory bodies, including the US Securities and Exchange Commission (SEC), require proper categorization of reserves on the basis of evaluating whether the volumes can be recovered economically in a timely manner. The reserves-management system should provide technical and economic volumes on the basis of up-to-date prices, capture and analyze uncertainties in the reserves volumes, provide secure data access and data archiving, and implement an approval and audit process. Introduction A method to integrate reserves management was developed that comprises three processes—data management, which ensures fast and secure access to reservoir data; economic and technical volume calculation; and a flexible reporting process. Reservoirs, as well as prospects, are organized within a corporate hierarchy. In accordance with SEC regulations and SPE/World Petroleum Council/American Association of Petroleum Geologists/Society of Petroleum Evaluation Engineers Petroleum Resources Management System (SPE-PRMS) guidelines, the data-management process captures proven, probable, and possible reserves, as well as discovered and undiscovered resources, for different petroleum products and companies with different working interests. Each category of each reservoir is associated with an economic case that contains information about costs, prices, and the fiscal regime. Economic volumes can be calculated on the basis of the results of economic evaluations of the reserves. Uncertainties in reservoir data are captured by use of multiple scenarios for each reservoir and category. A regional-pricing mechanism allows updating prices for all economic cases at a particular level of the corporate hierarchy. All changes to the economic-results data would be recorded and require approval. Challenges. Disclosure of oil and gas reserves is different from disclosure of company financial performance or production. While the financial performance of the company, at least in theory, can be calculated precisely, oil and gas reserves are uncertain by definition. Different proven methods of estimating reserves may yield different results. Moreover, different estimators that use similar methods may determine different numbers. New SEC regulations aim to improve transparency by providing investors with more information about the reserves. In particular, the new regulations permit disclosure of probable and possible reserves. It should be noted that information about probable and possible reserves also includes more uncertainties, compared with proven reserves.

Financial Restatements and Shareholder Ratifications of the Auditor

SUMMARY: Regulators and legislators have focused significant attention on financial statement restatements in recent years, and the U.S. Securities and Exchange Commission (SEC) and financial statement users view restatements as audit failures. The SEC (2000, 2003a) suggests that shareholder voting on auditor ratification will be impacted by perceptions of audit quality. In this paper we examine shareholder voting on auditor ratifications in 2005 or 2006 following restatement announcements by SEC registrants. We find that shareholders are more likely to vote against auditor ratification after a restatement when compared with votes at (1) firms without restatements or (2) restating firms in the preceding period. Overall, the results provide empirical support to the SEC's assertion that shareholder voting on auditor ratification will be related to perceptions of audit quality, and also support recent actions by shareholder activists to require all firms to submit the selection of the auditor for a ratification vote by shareholders.

SEC Intervention and Industry Guidance: The Effect on Non-GAAP Financial Disclosures

This paper examines how the U.S. Securities and Exchange Commission (SEC) intervention in 2003 regarding non-GAAP disclosures affects the reporting of Funds from Operations (FFO), an industry-guided non-GAAP measure commonly reported by Real Estate Investment Trusts (REIT). We find that, contrary to prior findings on pro forma earnings, SEC intervention does not deter the reporting of FFO. Nonetheless, we show that, subject to additional disclosure requirements and increased scrutiny by the SEC after 2003, companies are more likely to follow industry guidance in selecting FFO exclusions. While research in pro forma shows SEC regulations motivate firms to inappropriately exclude some items that are persistent, we find that all exclusions from FFO have become more transitory after SEC intervention. We also find that companies are less likely to manage the FFO measure to beat or meet analysts' forecasts and the market perceives FFO as being more value relevant following intervention by the SEC. Collectively, our findings suggest that, with sufficient industry guidance, the SEC can best achieve its objectives of improving the quality of non-GAAP reporting without reducing firms' willingness to provide value relevant non-GAAP information or increasing managers' likelihood to reclassify recurring expenses into the recommended exclusion items.

The influence of capital market laws and initial public offering (IPO) process on venture capital

This paper is concerned with the influence of capital market laws and initial public offering (IPO) process on venture capital. It discusses the impact of US federal state laws and Securities and Exchange Commission (SEC) regulations to the venture capital markets, arguing if the rules and regulatories are burdensome to entrepreneurs and new-growth businesses. The impact of Sarbanes-Oxley Act and the future Investment Act on venture capital funds and entrepreneurial companies going public are also discussed. The paper proposes the model of venture capital financing describing the process from fund raising to investment exits, the linkages of the venture capital market to the financial/capital markets and the related capital market laws. The policy implications on SEC regulations essential to the development of venture capital industry are suggested.

Convergence between US GAAP and IFRS: Acceptance of IFRS by the US Securities and Exchange Commission (SEC)

The world's capital markets stand to benefit significantly from widespread acceptance and use of global accounting standards that are high quality, comprehensive and rigorously applied. The US Securities and Exchange Commission (SEC) announced in April 2007 a series of actions it intends to take relating to the acceptance of International Financial Reporting Standards (IFRS). To implement this, the SEC proposed in July 2007 amendments to Form 20-F and conforming changes to SEC Regulation S-X to accept financial statements prepared in accordance with IFRS without reconciliation to US Generally Accepted Accounting Principles (GAAP) when contained in the filings of foreign private issuers with the SEC. This paper analyses the forces driving convergence between US GAAP and IFRS and discusses the most recent activities by the SEC in relation to IFRS and international cooperation, including the SEC vote as of 15 November 2007, to allow foreign private issuers to prepare their financial statements using IFRS as issued by the IASB without reconciling to US GAAP.

SEC adopts amendments to Regulation SHO

PurposeThe purpose of this paper is to summarize and explain amendments to SEC Regulation SHO adopted on June 13, 2007Design/methodology/approachThe paper explains elimination of “grandfather” exception to Reg SHO close‐out requirement, explains proposed amendments to options market maker exception and long locate requirement, and explains elimination of all price tests that were designed to restrict short selling in bear markets.FindingsThe paper finds that, in June 2007, the Securities and Exchange Commission (SEC) adopted and proposed amendments to the short sales rules under the Securities Exchange Act of 1934 (the “Exchange Act”). The SEC: adopted amendments to Rules 200 and 203 of Regulation SHO to: the eliminate the “grandfather” exception to the “close out” requirement, extend the current close out requirement of 13 consecutive settlement days for securities sales pursuant to Rule 144 under the Exchange Act to 35 settlement days, and update the market decline limitation relating to index arbitrage trading activity;proposed and re‐proposed amendments to Regulation SHO to eliminate the “option market maker” exception to the close out requirement, and to require broker‐dealers making a sale as “long” to document the present location of the securities being sold; and adopted amendments to Rule 10a‐1 and Regulation SHO to repeal all price tests, including the “tick” test, and to provide that no price test, including any price tests of any self‐regulatory organization (“SRO”), shall apply to short sales of any securities. The adopted amendments to Rule 10a‐1 and Regulation SHO to repeal all price tests took effect on July 3, 2007. The other adopted amendments to Regulation SHO will take effect 60 days after publication in the Federal Register.Originality/valueThe paper provides a concise, practical summary by lawyers who specialize securities markets regulations.

Information content of control deficiency disclosures under the Sarbanes–Oxley Act: An empirical investigation

Sections 302 and 404 of the landmark Sarbanes–Oxley Act require firms to periodically assess and report certain types of internal control deficiencies to the audit committee, external auditors, and to the Securities and Exchange Commission (SEC). External auditors are also required to opine separately on the effectiveness of their client's system of internal control over financial reporting and issue an ‘adverse opinion’ on internal control effectiveness in the presence of even a single material weakness. These new requirements have elicited opposition from corporations, while regulators have cited their benefits to capital markets. Given this differential view, we examine whether such internal control weakness disclosures convey valuation-relevant information to the US equity markets. This issue is important because increasing disclosure requirements without any attendant effect on valuation would impose unnecessary deadweight costs on the shareholders of a company. Thus, to understand whether such disclosures about the effectiveness of a company's internal controls over financial reporting have any new information content, we study a number of voluntary disclosures made by the SEC registrants in the very early days of Sarbanes–Oxley implementation. We find that internal control weakness disclosures are associated with a negative stock price reaction, on average, indicating that such disclosures do indeed convey valuation-relevant information. This reaction is mitigated to some extent, but not fully, if management also discloses alongside the internal control weaknesses specific remediation steps that have been taken to correct the reported deficiencies. Additionally, the price reaction is less negative for firms employing a Big-4 auditing firm as their external auditors. Conversely, the reaction is more negative for firms with larger current liabilities relative to total assets, which suggest that disclosed internal control weaknesses may have implications for short-term default risk by the registrants.

An overview of online stock trading: history, characteristics, opportunities, challenges and the impact of the SEC regulation reform on trading structure

This paper discusses the impact of US Securities and Exchange Commission (SEC) regulation reform on online and traditional trading structures. The aim is to provide a review of relevant issues within online stock trading and subsequently form a research agenda. To achieve this aim the following objectives are set: (1) to describe the current state of online trading, (2) to provide an overview of Electronic Communications Networks (ECNs) and existing regulations and (3) to discuss the impact of SEC regulation reform on trading structures. In doing so this paper will provide insights into how ECNs are used and how their growth and development are affected by the SEC regulation reform.

Misleading Disclosure of Pro Forma Earnings: An Empirical Examination

The Sarbanes–Oxley (SOX) Act was passed in 2002 in response to various instances of corporate malfeasance. The Act, designed to protect investors, led to wide-ranging regulation over various actions of managers, auditors and investment analysts. Part of SOX, and the focus of this study, targeted the disclosure by firms of “pro forma” earnings, an alternate (from GAAP earnings), flexible and unaudited measure of firm performance. Specifically, SOX directed the Securities and Exchange Commission (SEC) to craft regulation which would reduce – and preferably eliminate – any pro forma earnings disclosure which might be “misleading”. Examining earnings press releases over a 3-year period, this study addresses three questions. Were firms disclosing pro forma in a potentially misleading manner, what was the nature of this potentially misleading disclosure, and did SOX affect the disclosure practices? We find the following. In 2001 (prior to SOX), 53 firms – over 10% of all U.S. S&P 500 firms – were disclosing pro forma earnings in a potentially misleading manner. This was being done most commonly by using traditional GAAP terminology (e.g., “net income”) in the press release headline to describe what was later in the press release revealed to be a pro forma amount (i.e., “net income excluding special items”). By 2003 (subsequent to the SEC regulation), potentially misleading disclosure practices were seen in less than 1% of the earnings press releases of S&P 500 firms. This significant reduction suggests that managers, prior to the regulation, were either careless in their pro forma reporting practice, or were intentionally – and unethically – attempting to mislead investors. Either way, we conclude that the SEC regulation was both necessary and effective.

Making Sarbanes—Oxley 404 work: Reducing cost, increasing effectiveness

Section 404 of the Sarbanes—Oxley Act of 2002 is, perhaps, one of the shortest sections of the Act but it has generated the most controversy both domestically and internationally. Although no one disagrees with the overall goals of Section 404 — strengthening and tightening controls over financial reporting — there is considerable opposition, and even disagreement among the regulators, on how best to implement the intent of Section 404 in the most cost-effective manner. The opposition to the implementation of Section 404 was so intense that less than a month after the 15th March, 2005 due date for first-time Securities and Exchange Commission (SEC) accelerated filers, the SEC hosted a Roundtable on 13th April, 2005 to receive feedback on the implementation experiences of the SEC registrants. The urgency to act was also so strong that the SEC, along with the Public Company Accounting Oversight Board (PCAOB), released new guidance in the form of a Staff Statement, on 16th May, 2005, to provide some clarity and more direction to the registrants as well as their external auditors as they prepared for the year-two certification. In spite of this additional clarification, dissatisfaction with the ‘how to do it’ versus the ‘why to do it’ continues to run high.

How the capital market laws affect the development of venture capital industry

Given that the stock market is essential for the venture capitalists to exit through an initial public offering (IPO), this study explores how the laws and regulations governing the capital markets affect the venture capital industry. The paper discusses the impact of US federal state laws and Securities and Exchange Commission (SEC) regulations to the venture capital markets, arguing if the rules and regulatories are burdensome to entrepreneurs and new‐growth businesses. The impact of Sarbanes‐Oxley Act and the future Investment Act on venture capital funds and entrepreneurial companies going public are also discussed. The paper proposes the model of venture capital financing describing the process from fund raising to investment exits, the linkages of the venture capital market to the financial/capital markets and the related capital market laws. The policy implications on SEC regulations essential to the development of venture capital industry are suggested.

Do SEC Regulations Constrain Offer Price Revisions of IPOS?

This paper examines how the setting of the final offer price for initial public offerings (IPOs) is influenced by Securities and Exchange Commission (SEC) regulations. The regulations require the issuer to file an amendment when deviating from the prior price estimate by greater than 20%. IPOs priced at the 20% limit are significantly more underpriced than IPOs that file an amendment for a larger price increase. However, this association is reversed, albeit weaker, for IPOs with negative price revisions. Offerings with constrained downward price revisions tend to be more over-priced. Issuers rationally choose not to re-file in order to avoid the cost and risk associated with delaying the offering. In comparison to offerings that constrain price revisions to within 20% of the prior estimate, offerings filing pricing amendments for changes of more than 20% take longer to complete and are associated with an increased risk of offering failure. Thus, ex ante issuers could be willing to leave some money on the table in terms of underpricing so as to increase the probability of deal success and complete the offering without delay. The Regulatory Constraint Hypothesis also provides an alternative explanation for the partial adjustment phenomenon that is independent of whether the information about demand for the offering is public or private. In response to unexpectedly high demand, the issuer is compelled to only partially adjust the offer price in order to stay within the allowable pricing threshold and avoiding delaying the offering. For positive revisions of the offer price, the results show a significant positive relationship between underpricing and offer price revision up to the point of the regulatory threshold, while the slope change at the regulatory threshold is negative and significant. I interpret these results as consistent with the hypothesis that SEC regulations are an impediment to accurate pricing of IPOs.

Composition of the audit committee: Ensuring members meet the new independence and financial literacy rules

Responding to the corporate scandals that have recently dominated the front pages of US newspapers, the Sarbanes–Oxley Act, the Securities and Exchange Commission (SEC) and the major US securities markets have imposed a number of sweeping corporate governance changes on public companies (including non-US public companies — so-called ‘foreign private issuers’) traded in the USA. Of special significance, the US federal securities laws and the major national securities markets now mandate that public companies possess audit committees composed of ‘independent’ members who meet exacting and specific criteria. Unfortunately, unlayering the various new and different corporate governance rules can be a complex and daunting task. In an effort to assist companies, including foreign private issuers, to understand and comply with these new rules — which are currently in effect for US companies and which will take effect no later than 31st July, 2005 for foreign private issuers — this paper provides a brief overview of key new requirements imposed by the Sarbanes–Oxley Act, and the SEC regulations promulgated thereunder, by the New York Stock Exchange (NYSE), and by the NASDAQ, including certain exceptions for foreign private issuers.

A Pathology of the Independence Standards Board's Conceptual Framework Project

ISB to cease operations after making major contributions to resolution of difficult and longstanding auditor independence issues. (AICPA 2001b) With that headline, Independence Standards Board (ISB or Board) announced that it was closing its doors. Why did Board dissolve before officially adopting its largely completed conceptual framework? What does Board's demise mean for future of independence rule making? This commentary is a pathology--which dictionary defines as the scientific study of nature of disease, its causes, processes, development, and consequences (1) -- of ISB's conceptual framework project, which ultimately affected Board's ability to survive. FORMATION AND OPERATION OF THE ISB The Securities and Exchange Commission (SEC) is responsible for developing rules to ensure independence of auditors of public entities. The SEC, American Institute of Certified Public Accountants (AICPA), and largest auditing firms agreed in June 1997 to form an. independent, private body to establish independence standards applicable to auditors of SEC registrants (SEC 1998, Sec. II). Funded by accounting profession, that body--the ISB--consisted of four well-known and highly respected public members, one of whom was elected chair, and four members from accounting profession--three CEOs from Big 5 and CEO of AICPA. The SEC's Chief Accountant, or his/her designee, had observer status at Board meetings. An Executive Director and a small staff coordinated Board's operations (which began in October 1997), helped inform public about ISB's activities, and ensured regular communications with SEC, AICPA, and regulators and standard setters outside U.S. (2) In addition to issuing three independence standards, Board started a project to develop a framework to serve as a conceptual foundation for its future work. The ISB retained us as project directors and appointed a task force composed of auditors, audit committee members, academics, state board of accountancy representatives, analysts and other financial statement users, corporate executives, representatives from international standard setters, AICPA chair, and SEC observer. The Board also retained a business ethicist to assist in project, and a group of three Board members monitored framework project. To stimulate public debate about conceptual issues, in February 2000 Board issued Discussion Memorandum (DM) 00-1, A Conceptual Framework for Auditor Independence (ISB 2000a). After considering comments received during exposure period from individuals and groups in academic, auditing, standard-setting, and investor communities, Board directed staff and consultants, assisted by project task force, to develop an Exposure Draft (ED) of a proposed Statement of Independence Concepts. That ED was issued in November 2000 (ISB 2000b). Based on additional public comments and further assistance from project task force members, Board's oversight task force, and others, staff and consultants revised ED and prepared a final draft of a conceptual framework for Board's review. (3) CONTROVERSIAL ISSUES IN THE FRAMEWORK PROJECT The most significant debates among parties involved in framework's development concerned role of independence in appearance and appropriateness of a threats and safeguards approach. The nature of those debates provides important insights into future of auditor independence regulation. Independence in Appearance The appearance of independence has long been part of auditors' ethical standards. (4) Nevertheless, how to incorporate investors' and other financial statement users' perceptions into a conceptual framework for independence was extremely controversial. (5) There was little disagreement among project's participants that improving financial statement credibility and enhancing user confidence are important outcomes of an audit and an auditor who appears to be independent contributes to those outcomes. …

The Relevance of Form 8-K Reports

In this paper, we investigate the timeliness of and stock price reaction to a sample of Form 8-K reports filed in 1993 with the Securities and Exchange Commission (SEC). Under current SEC regulations, a Form 8-K must be filed within 5 to 15 days after the occurrence of certain events, such as a bankruptcy filing or an auditor change, as well as after any material development that a registrant believes is relevant to its investors. The SEC's presumption is that the Form 8-K is relevant to investors; in particular, the report plays a critical role in the periodic reporting system, which is intended to provide investors with a continuous stream of corporate information (SEC Accounting Series Release No. 306 [1982]). This function has assumed greater importance in light of proposals made by the SEC to expand the number of required disclosures in the Form 8-K and to reduce the allowed time for filing. Specifically, in an attempt to provide more consistent and timely disclosure by all public companies, the SEC proposes that earnings and selected other financial data be released through an 8-K within 30 days after the end of each

Recognition versus Disclosure in the Oil and Gas Industry

I investigate whether recognition and disclosure have equivalent pricing consequences in the oil and gas industry. I concentrate on the oil and gas industry because Securities and Exchange Commission (SEC)Regulation SX [1978, sec. 210, para. 4-10] provides a unique opportunity for testing the stock price consequences of recognition versus disclosure. The SEC regulation requires the firm-specific effect of a macroeconomic event such as a major change in oil prices to be formally recognized in the financial statements for oil and gas firms adopting the full cost method but only disclosed in footnotes for firms following the successful efforts method. My results indicate that the effect of footnote disclosure on price differs from the effect of recognition. Whether users of financial statements distinguish between recognition and disclosure is often an important question in the debate over accounting standards. However, this question was never explicitly empirically tested (for a literature review, see Bernard and Schipper [1994]). The experimental literature (Harper, Mister, and Strawser [1987; 1991]) suggests that whether an item is recognized or disclosed influences financial statements users' perceptions. However, the experimental studies do