Browsing by Author "Knoblett, James A"

Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    A Comparison of Preparer and User Evaluation of Multinational Corporations Following the Issuance of SFAS No. 52
    (Bureau of Business and Economic Research, 1994-08) Li, June F; Clark, Myrtle W; Knoblett, James A
    This study is prompted by the lack of evidence regarding how managers (MNCEs) of multinational corporations (MNCs) and users, certified financial analysts (CFAs), utilize the information provided in consolidated financial statements in decision-making. A survey was conducted to examine whether the Statement of Financial Accounting Standards (SPAS) No. 52 is associated with revisions in the manner in which MNCEs and/or CFAs evaluate MNC financial position and performance and to determine how translation gains and losses are used in their respective decision models. Results indicate that MNCEs changed how they treat translation adjustments when evaluating their own companies after SPAS No. 52. The CFA practices were unaffected. Most CFAs surveyed include translation gains and losses when calculating financial ratios that involve either earnings or equity, regardless of whether those gains and losses are recognized in earnings or in equity. These CFAs perceive translation adjustments useful in assessing MNC performance, no matter what the functional currency of a foreign subsidiary is. In addition, either MNCEs nor CFAs perceive investments in MN Cs to be less risky as a result of SF AS No. 52, despite predictions that costly hedging activities would decrease. Furthermore, a majority of the CFAs reported that the evaluation of MNCs has not been simplified. Finally, study results imply that no translation adjustments should be reported in earnings, even when the functional currency is the U. S. dollar.
  • Thumbnail Image
    Item
    FASB Statement 52 and Multinational Corporations' Hedging and Debt Denomination Decisions
    (Bureau of Business and Economic Research, 1994-08) Li, June F; Clark, Myrtle W; Knoblett, James A; Poe, C. Douglas
    This study examines the effects of the Statement of Financial Accounting Standards (SFAS) No. 52 on hedging and debt denomination decisions of multinational corporations (MNCs). Specifically, executives of MNCs and users of MNC financial statements were asked questions regarding two issues: 1. What are the effects of SFAS No. 52 on the hedging activities of MNCs? and 2. Has SPAS No. 52 affected decisions regarding debt denomination of MNCs? Two major conclusions can be drawn from the research: (1) Accounting exposure hedging continues to be prevalent. SFAS No. 52 does not appear to have discontinued or decreased hedging of accounting exposure in MNCs, and (2) SFAS No. 52 seems to have caused a shift between some MNCs' U.S. dollar debt and local currency debt. Prior research on the hedging activities of MNCs has provided inconsistent results. This study documents evidence which implies that MNCs' executives (MNCEs) and certified financial analysts (CFAs) who follow MNCs do not report/believe that accounting exposure hedging activities decreased in all cases. Specifically, when the local currency is the functional currency, both groups responded that this form of hedging has continued. Results regarding these activities are contrary to research expectations. SPAS No. 52 does not appear to have solved all issues of accounting vs. economic exposure. Results of the present study indicate that SFAS No. 52 has not decreased the hedging of accounting exposure for local-functional-currency subsidiaries. Whether a company participates in hedging activities or not may be due more to corporate practices and policies than to accounting requirements. In other words, hedging may well be a practice or policy of MNCs regardless of the accounting requirements. In addition, prior research provided limited evidence that SPAS No. 52 might have affected MNCs' choices in which debt was denominated. The MNCEs surveyed in this study report a significant effect of SPAS No. 52 on the U.S. dollar debt and the local or other currency debt of their own company. The findings provide support for the contention that SPAS No. 52 does impact financing decisions of MNCs.