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Earnings components and the asymmetric timeliness of earnings: the case of FRS 3 in the UK

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  • Ann L.-C. Chan
  • Stephen W.J. Lin
  • Norman Strong

Abstract

We exploit a unique setting to examine how an accounting regulation change affects the asymmetric timeliness of earnings. Financial Reporting Standard No. 3: Reporting Financial Performance (FRS 3) changed the way listed UK companies recognised bad news through ordinary or extraordinary items. FRS 3 tightened the definition of extraordinary items but gave wider discretion in classifying exceptional items. The results were that, after FRS 3, the asymmetric timeliness of earnings before extraordinary items increased and the association of earnings conservatism with discretionary accruals was weaker.

Suggested Citation

  • Ann L.-C. Chan & Stephen W.J. Lin & Norman Strong, 2011. "Earnings components and the asymmetric timeliness of earnings: the case of FRS 3 in the UK," Accounting and Business Research, Taylor & Francis Journals, vol. 41(4), pages 393-410, September.
    • Handle: RePEc:taf:acctbr:v:41:y:2011:i:4:p:393-410
    DOI: 10.1080/00014788.2011.573662
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    References listed on IDEAS

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    1. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
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    Cited by:

    1. Malikov, Kamran & Manson, Stuart & Coakley, Jerry, 2018. "Earnings management using classification shifting of revenues," The British Accounting Review, Elsevier, vol. 50(3), pages 291-305.
    2. Reguera Alvarado, Nuria & Laffarga Briones, Joaquina & de Fuentes Ruiz, Pilar, 2015. "Modelos de gestión de resultados: un estudio transnacional," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 18(1), pages 11-19.
    3. Moy, Melissa & Heaney, Richard & Tarca, Ann & van Zyl, Warrick, 2020. "Conditional accounting conservatism: Exploring the impact of changes in institutional frameworks in four countries," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(3).

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