The Market Pricing of Other-Than-Temporary Impairments

• 成果类型: Article
• 署名作者: Badertscher, Brad A.; Burks, Jeffrey J.; Easton, Peter D.
• 署名单位: University of Notre Dame
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50685
• 发表日期: 2014
• 页码: 811-838
• 关键词: FINANCIAL CRISIS; investment securities; comprehensive income; COMMERCIAL-BANKS; losses; valuation; earnings; gains

摘要

When the fair value of an investment security falls below amortized cost and there is significant doubt that the firm can hold the security until the fair value recovers, an other-than-temporary impairment (OTTI) is recognized in net income. Thus, an OTTI is a disclosure about the prospect of recovering an unrealized loss. Our findings suggest that investors priced banks' OTTI recognition during and after the financial crisis. Investors were unable to fully anticipate reported OTT's, and priced OTTIs incrementally to reported unrealized gains/losses. After banks were required to bifurcate OTTIs, investors priced only the portion of OTTI recognized in earnings. Our results suggest that reporting unrealized losses in earnings via an OTTI changes how investors price the losses. The results inform recent standard-setting initiatives to expand disclosure about changes in fair value.