We investigate the determinants of discretionary SFAS 106 choices of non-regulated firms. We find that more unionized firms are more likely to use immediate recognition, consistent with incentives to reduce labor renegotiation costs. Immediate recognition is more prevalent among post-adoption plan modifiers, particularly if their transition obligation is large, consistent with incentives to increase future reported earnings. Immediate recognition, together with post-adoption benefit plan reduction, frees future income from the transition obligation amortization expense and adds a positive component as negative prior service costs are amortized. Immediate recognition is less prevalent among firms with higher potential debt contracting costs.
Journal of Accounting and Economics – Elsevier
Published: Oct 1, 2000
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