We hand‐collect SFAS 157 voluntary fair value disclosures of 18 bank holding companies. The SEC's Division of Corporate Finance likely targeted these entities in 2008 through their “Dear CFO” letters in which they requested specific, additional disclosure items. We collect disclosures that match the SEC recommendations and create eight common factor disclosure variables to examine the effect of such disclosures on information asymmetry. We find that disclosure variables about the use of broker quotes or prices from pricing services and the use of market indices and illiquidity adjustments are related to lower information asymmetry. However, disclosure variables about valuation techniques and asset‐backed securities are related to greater information asymmetry. We also document that disclosure complexity, and disclosure tone (uncertainty and litigious) is related to greater information asymmetry. These findings are consistent with criticism that corporate disclosures are voluminous; management may obfuscate unfavorable information which in turn increases market participants’ assessment of uncertainty associated with the fair value measures. We caveat that the setting of the financial crisis and a small sample size may limit the ability to generalize these inferences to other time periods or other financial firms.
This case seeks to enhance student understanding of the relationship between accounting information and the order fulfillment and production activities of a manufacturing firm, Great Galway Goslings. Great Galway Goslings manufactures goose sculptures and has been suffering losses in recent years. Students draw on the skills they learned in financial accounting to analyze the company's order fulfillment activities, identify economic transactions, and prepare journal entries. The case provides a link to managerial accounting topics as students use segment financial statements to create contribution margin income statements, perform break-even analyses, and recommend whether Great Galway Goslings should keep its retail business segment. Students will become familiar with the key features of business process management (BPM) and the extensive, real-world activities that a manufacturing entity engages in to fill an order. Students will analyze the company's existing order fulfillment process and apply their knowledge of BPM to recommend process improvements for Great Galway. This case contributes to the accounting case literature by serving as a bridge from financial accounting to managerial accounting, intertwining many topics from managerial accounting into one cohesive case, and providing real-world business process knowledge. Student feedback indicates that, overall, the case met its stated learning objectives. Great Galway Goslings is appropriate for an undergraduate introductory managerial accounting course but can be adapted to the equivalent graduate-level course or an accounting information systems course.
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