The Value Relevance of Financial Statement Recognition vs. Disclosure: Evidence from SFAS No. 106.

Paquita Y. Davis-Friday
Lookman Buky Folami, Bryant University
Liu Chao-Shin
Fred H. Mittelstaedt

Document Type Article

Published in The Accounting Review, volume 74 issue 4, 1999. Bryant users may access this article here.


This study examines whether the market values financial statement data differently if it is disclosed instead of recognized in the body of the financial statements. We identify a sample of 229 SFAS No. 106 adopters who disclose an estimate of their anticipated liability for retiree benefits other than pensions (PRB) in their financial reports prior to the year of recognition. We then test whether the disclosed estimate of the PRB liability is valued differently by the market than is the subsequently recognized PRB liability. We provide modest and model-sensitive evidence that the recognized PRB liability receives more weight than the disclosed liability in market value association tests.