An Empirical Investigation of the True and Fair Override in the United Kingdom
The True and Fair View concept requires companies to depart from GAAP or the law if necessary to present a true and fair view of the corporation's financial affairs. We analyze UK public companies invoking a true and fair override to assess whether overrides are associated with weakened performance, earnings quality and informativeness. We find quantified overrides increase income and equity significantly, and firms that invoke more costly overrides report weaker performance. We also find that firms invoking the most costly overrides have less informative financial statements than control firms, and lower earnings quality. In contrast, firms invoking less costly overrides do not exhibit weaker performance, less informative financial statements or weaker earnings quality. These findings are relevant for the debate on principle- vs. rules-based accounting. Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.
Year of publication: |
2009-01
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Authors: | Livne, Gilad ; McNichols, Maureen |
Published in: |
Journal of Business Finance & Accounting. - Wiley Blackwell, ISSN 0306-686X. - Vol. 36.2009-01, 1-2, p. 1-30
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Publisher: |
Wiley Blackwell |
Saved in:
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