Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/77060

A Principle of Classification

File Size Format  
HARC-2022 paper 378.pdf 533.21 kB Adobe PDF View/Open

Item Summary

Title:A Principle of Classification
Authors:Konvalinka, Matjaz
Penno, Mark
Stecher, Jack
Keywords:classification shifting
opacity
principles
signaling
Date Issued:2021
Abstract:We study a firm's decision to classify transactions as recurring or nonrecurring in a setting with no fixed classification scheme, but with the following principle: transactions classified as recurring must be more persistent than those classified as nonrecurring. This principle corresponds to existing classification standards. We find that the firm’s optimal classification strategy has a simple form: maximize the product of the (absolute) total of income-reducing nonrecurring and the total income-increasing recurring items. We characterize the possible firm values consistent with a report, and provide a measure of how opaque a firm’s valuation is given its classification choice.
URI:http://hdl.handle.net/10125/77060
Appears in Collections: 17 Other accounting issues (OTHER)


Please email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.

Items in ScholarSpace are protected by copyright, with all rights reserved, unless otherwise indicated.