Question: It appears that the value relevance of reported earnings as
It appears that the value relevance of reported earnings, as measured by R2 or ERC, is low, and possibly falling over time. Use single- person decision theory to explain why the value relevance of reported earnings can be measured by R2 or ERC. Is it possible for an abnormal share return to increase but R2 and ERC to fall? Explain.
Answer to relevant QuestionsThe joint IASB/ FASB Framework (Section 3.7) will have significant effects on financial reporting as it is implemented.Required a. The Framework drops the word “rational” as a description of investor and creditor ...Recent years have seen considerable litigation against auditors in the United States. A major source of this litigation arises from the pressure firms feel to meet analysts’ earnings expectations. To avoid reporting lower- ...Share prices of many “high- tech” firms are quite volatile relative to the stock market index. In an article in The Wall Street Journal (reprinted in The Globe and Mail, May 16, 2001, Greg Ip discussed a reason why. He ...Manulife Financial is a large Canadian- based insurance and financial services company, with operations in Canada, United States, and Asia. Like most such companies, Manulife’s profits are suffering from low interest rates ...Swap contracts are a type of derivative that is often used to manage financing costs. To illustrate, suppose a firm has $ 200,000 of 10% bonds outstanding at December 31, 2010. Interest is payable semi- annually, and the ...
Post your question