Management Going Concern Disclosure, Mitigation Plan, and Failure Prediction-Implications from ASU 2014-15

• 成果类型: Article
• 署名作者: Wang, Jingjing
• 署名单位: University of Calgary
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2019-0432
• 发表日期: 2021
• 页码: 417-446
• 关键词: turnaround strategies; information-content; Investor reaction; audit opinions; FIRMS; performance; MARKET; bankruptcy; EFFICIENCY; valuation

摘要

The going concern (GC) assumption forms the basis for preparing financial statements unless liquidation becomes imminent. ASU 2014-15 requires management to evaluate GC uncertainties quarterly and provide disclosures in the notes. I compare management GC disclosures between the pre-standard and poststandard regimes. I find that the market reacts negatively to substantial doubt in GC only after ASU 2014-15. Next, I find the effect of ASU 2014-15 for quarterly reports, but not annual reports. More importantly, by employing detailed textual analysis to extract and categorize mitigation-plan discussions, I show that certain types of management mitigation plans are interpreted more positively by investors after ASU 2014-15, thereby alleviating the negative market reaction. These plans include issuing debt, debt restructuring, increasing revenue, and selling assets. Finally, I demonstrate that management GC conclusions are more indicative of corporate failures after ASU 2014-15 and that mitigation-plan discussions are associated with firms' future viability.