The mixed attribute model in SFAS 133 cash flow hedge accounting: implications for market pricing

• 成果类型: Article
• 署名作者: Makar, Stephen; Wang, Li; Alam, Pervaiz
• 署名单位: University of Wisconsin System; University System of Ohio; University of Akron; University System of Ohio; Kent State University; Kent State University Salem; Kent State University Kent
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-012-9201-z
• 发表日期: 2013
• 页码: 66-94
• 关键词: EXCHANGE-RATE EXPOSURE; VALUE-RELEVANCE; information-content; COMMERCIAL-BANKS; RISK-MANAGEMENT; earnings; INVESTMENT; determinants; DISCLOSURES; valuation

摘要

In this study, we examine the pricing of cash flow hedge adjustments reported in other comprehensive income (OCICF), under the mixed attribute model in SFAS 133 Accounting for Derivative Instruments and Hedging Activities. Our OCICF pricing investigation integrates empirical research on the derivatives use that gives rise to such mark-to-market adjustments with the accounting information pricing literature. Based on this integration, we generalize mispricing theory for the SFAS 133 mixed attribute model and predict both the direction and magnitude of OCICF pricing. Screening on U.S. multinationals with ex ante exposure to currency risk, we provide evidence of OCICF mispricing in the expected direction, consistent with the notion that SFAS 133 cash flow hedge accounting results in a mixed attribute problem (Gigler et al. in J Account Res 45:257-287, 2007). Moreover, we find that both OCICF gains and losses are inversely related to future cash flows and of the expected magnitude, consistent with our predictions based on valuation theory (for example, Ohlson in Rev Account Stud 4:145-162, 1999). Our results support the Financial Accounting Standards Board's concern that the SFAS 133 mixed attribute model does not provide the information necessary for investors to understand the net economic effects of derivatives use (FASB in Accounting for financial instruments and revisions to the accounting for derivative instruments and hedging activities. FASB, Norwalk, 2010).