Nick Hirner, Thomas J. Linsmeier, & Daniel D. Wangerin (2026)
Abstract: This study examines whether income statement presentation incentives affect firms’ real economic decisions. We exploit two recent changes in pension accounting standards that differentially altered the presentation and measurement of pension costs. ASU 2017 07 changed only the income statement presentation of pension cost components under U.S. GAAP, while IAS 19R changed both presentation and measurement under IFRS. Using difference in differences designs, we find that U.S. GAAP firms with stronger operating income presentation incentives significantly de risked their defined benefit pension portfolios following ASU 2017 07. On average, these firms reallocated approximately 5% of plan assets from higher risk to lower risk investments, implying a market wide shift of roughly $74 billion. Cross sectional analyses show that this de risking is concentrated among firms with stronger pre period presentation incentives and with weaker competing plan management incentives. In contrast, while IFRS firms generally reduced pension investment risk following IAS 19R, we find no evidence of an incremental presentation effect among firms with stronger operating income presentation incentives. This pattern suggests that although income statement presentation incentives can independently influence real economic behavior, their effects are dominated in this setting when accounting changes simultaneously alter underlying measurement.
Status: Preparing for Submission
Solo Authored Project
Abstract: This study examines whether governmental reporting incentives shape real economic decisions, using GASB Statements 67 and 68 as a shock to the recognition and measurement of U.S. governmental pension liabilities. GASB 68 was the first governmental accounting standard to require recognition of the net pension liability on sponsors' statements of net position. Further, GASB 67 and 68 introduce a blended discount rate approach to measurement that mechanically increases reported liabilities for plans without sufficient assets to cover the long-term plan liability. This research question speaks to whether accounting incentives, rather than behavioral or consultant-driven determinants, can influence decision-making within the governmental setting.
Status: Data Collection and Analysis