Evidence on the Incremental
Information Contained in the
Components of Restructuring
Thomas J. Lopez*
In response to the dramatic increase in corporate restructurings
and perceived abusive accounting practices, the Emerging Issues
Task Force (EITF) released Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring (EITF 94-
3), in 1994. This consensus provides guidance on the content
and timing of restructuring charges as well as the disclosures that
must be made related to these events.
Among the new
disclosures required by EITF 94-3 is the requirement that firms
disclose the nature and amounts of the material components of a
restructuring charge. The objective of this paper is to assess
Journal of Business Finance & Accounting, 29(5) & (6), June/July 2002, 0306-686X
ß Blackwell Publishers Ltd. 2002, 108 Cowley Road, Oxford OX4 1JF, UK
and 350 Main Street, Malden, MA 02148, USA.
* The author is a Professor in the School of Accountancy, Georgia State University. This
paper is based on the author's dissertation at Arizona State University. He thanks Philip
Regier, James Boatsman, Michael Hertzel, Marilyn Misch, Tanya Lee, Marty Loudder,
Michael Clement, Lynn Rees, Bill Cready, Gil Manzon, Pete Wilson, Janet Meade, Austin
Reitenga, Agnes Cheng, K. Sivaramakrishnan, Jim Linck, Mike Kinney, Mike Wilkins, Ed
Swanson, Mary Ellen Carter, and an anonymous referee for their valuable contributions.
He also gratefully acknowledges the suggestions of the accounting faculty at Arizona State
University and workshop participants at Arizona State University, the University of
Arkansas, Texas A&M University, Boston College, Florida State University, and the
University of Houston. He also appreciates the financial support of the AICPA and the
KPMG Peat Marwick Foundation. (Paper received October 2000, revised and accepted
Address for correspondence: Thomas J. Lopez, School of Accountancy, J. Mack Robinson
College of Business, Georgia State University, 514 RCB Building, PO Box 4050, Atlanta,
GA 30302-4050, USA.