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Management has considerable discretion over how to present and announce earnings components that are either unusual or infrequent, but not both (hereafter referred to as special items). In this study, we study the independent and joint effects of the accounting presentation format of, and the level of announcement prominence given to income-decreasing special items on investors’ judgments about the persistence of declining earnings.

Our study uses a 3 (format) × 2 (prominence) between-subjects design. In the experiment, participants act as proxies for nonprofessional investors to assess the persistence of a hypothetical firm’s declining earnings and make investment decisions.

Our results suggest that investors’ judgments are influenced by accounting presentation format and the level of announcement prominence. With respect to format, both classification and disaggregation affect investors’ assessment of earnings persistence. In addition, the degree of prominence given to an income-decreasing special item, albeit self-serving and not audited, introduces additional influence beyond that of accounting presentation format. In particular, we find that announcement prominence has a greater effect when the special item is aggregated with other operating expenses than when the special item is presented under the two other alternatives.

Our study contributes to the literature by demonstrating that presentation format and announcement prominence both have significant impact on investors’ judgments and decisions, and that their effects are interactive. Our results also indicate that future research can possibly gain better insight if it considers the accounting attributes of the special items in addition to their economic attributes.

This paper aims to analyze the association between goodwill defined as difference between market and book value of equity and reports of nonrecurring items, namely, special items, discontinued operations and extraordinary items to suggest information related to restructuring activities measured by these items can link the valuation and incentive roles of accounting. Economic intuition suggests that successful managerial efforts should increase firm value. Yet, the link between the valuation and stewardship roles of earnings has been difficult to verify.

The author first estimates whether nonrecurring items have an incremental ability to explain goodwill, measured as the difference between market and book value of equity, at the industry level and then estimates whether firm-specific accounting bias is associated with the industry-level signals sent by nonrecurring items. The author then analyzes whether these items are associated with the use of chief executive officer (CEO) market-based compensation.

The author’ results show that information contained in special items increases firm-specific goodwill, indicating that it sends signals to investors about future growth opportunities, while that of discontinued operations reduces goodwill, suggesting that it provides signals about the adjustments of book value. She does not find any significant informational role for extraordinary items. She also finds that the signals sent by special items are negatively associated with the use of CEO market-based compensation, while those relayed by discontinued operations are positively associated with the use of market-based pay.

Contrary to prior studies, the results show special items and discontinued operations are both value and incentive relevant. There are two caveats to this analysis. First, owing to the frequent changes in the definition of discontinued operations, the analysis is conducted using data between 1992 and 2003. Second, some might argue that industry-level incremental R² might not be appropriate for a compensation analysis. However, entities often use industry norms as a benchmark to set CEO compensation. Thus, it is reasonable to think that industry-level signals matter for executive pay.

The author’s findings suggest that compensation committees in firms across industries consider the information contained in special items and discontinued operations, and selectively alter the level of incentives to encourage managerial efforts.

This paper aims to provide evidence of an unintended observable consequence of International Financial Reporting Standards (IFRS) adoption by examining opportunistic use of earnings management through revenue as well as expense items classification shifting in the year of transition.

To document classification shifting, the authors take advantage of the Korean mandatory IFRS adoption in 2011, when broad discretion was given to publicly traded companies’ managers to present operating profits.

It is found that companies strategically use both revenues and expenses to manage core earnings at the time of transition by shifting other income as a common tactic to improve their operating performance and special expenses just to meet or beat earnings targets.

Given the concerns of the Securities and Exchange Commission (SEC) about classification shifting behavior and the debate over whether the SEC should mandate the use of IFRS for US companies, the findings of this study are timely and contribute to authors’ understanding of the unintended consequences of mandatory IFRS adoption.

This paper aims to examine whether financially distressed firms manipulate core or operating income through the misclassification of operating expenses as income-decreasing special items.

This sample comprises firms in the USA with data from 1989 to 2010. The authors used the methodology given in McVay (2006) and multiple regressions.

Managers of financially distressed firms are more likely to inflate core or operating income as compared to the healthy firms to meet or beat earnings benchmarks. They do so by misclassifying core or operating expenses as income-decreasing special items. Specifically, core expenses are shifted to income-decreasing special items like goodwill impairments, settlement costs, restructuring costs and write downs.

The paper sheds light on an important firm characteristic, financial distress that intensifies classification shifting – an earnings management tool which auditors, investors and regulators find tough to detect. The findings have implications for investors, as they fail to comprehend such shifting (McVay, 2006); analysts, who issue forecasts based on street earnings; lenders, as distressed firms may be concealing their true performance; and regulators, as the misclassification of income statement items is a violation of accounting principles.

The authors extend the literature on accruals and real earnings management by the financially troubled firms and present first evidence that the managers of such firms also manipulate core or operating income through classification shifting.

This study aims to investigate whether managers of Japanese firms that adopt international financial reporting standards (IFRS) engage in earnings management by shifting core expenses to reported discontinued operations. Based on this purpose, the author also investigates the impact of continuing operations reporting on core earnings.

This study uses regression analysis mainly using the expected-core-earnings model (McVay, 2006) on a sample of Japanese firms adopting IFRS. The sample consists of 317 firm-year observations representing 48 Japanese firms that adopted IFRS from 2010 to 2018, noting that Japan has adopted IFRS since 2010.

The author finds that firms shift operating expenses of continuing operations to discontinued operations to increase core earnings. Additionally, the author desegregates reported discontinued operations into core and non-core earnings because previous literature assumes that firms engage in classification shifting using special items. Results reveal that firms use the classification shifting using negative non-core earnings of discontinued operations. Furthermore, the income-increasing discontinued operations negatively influence both current and future core earnings while income-decreasing discontinued operations do not.

The result could rely on the efficiency of the expected core earnings model. The author intentionally use only the Japanese sample rather than a global sample to control the characteristics of each country that can be noise; it could be a bias of this study.

The author revealed that firms engaged in the classification shifting using negative non-core earnings of discontinued operations. Providing detailed information on discontinued operations, segmented core earnings and non-core earnings (special items) is necessary. Deficiency of details on discontinued operations can create information asymmetry between managers and investors. It can encourage managers to engage in opportunistically earnings management using discontinued operations, taking advantage of investors’ ignorance of the nature of the expenses allocated to discontinued operations.

This study would be beneficial to investors by informing them of the potential usefulness and risks of IFRS because it is believed that IFRS is to be the predominant set of accounting standards in the world.

The author exposes a potential earnings management practice under IFRS by extending the literature on classification shifting through examining the relationship between unexpected core earnings and discontinued operations. The author extends prior research for classification, developing it to an investigation of the impact on core earnings, finding that income-increasing discontinued operations negatively influence core earnings, whereas income-decreasing discontinued operations do not. This study indicates that standard setters should pay close attention to the potential problems of line-item separations of discontinued operations.

Managers generally have discretion in determining how components of earnings are presented in financial statements in distinguishing between “normal” earnings and items classified as unusual, special, significant, exceptional or abnormal. Prior research has found that such intra‐period classificatory choice is used as a form of earnings management. Prior to 2001, Australian accounting standards mandated that unusually large items of revenue and expense be classified as “abnormal items” for financial reporting, but this classification was removed from accounting standards from 2001. This move by the regulators was partly in response to concerns that the abnormal classification was being used opportunistically to manage reported pre‐abnormal earnings. The purpose of this paper is to extend the earnings management literature by examining the reporting of abnormal items for evidence of intra‐period classificatory earnings management in the unique Australian setting.

This study investigates associations between reporting of abnormal items and incentives in the form of analyst following and the earnings benchmarks of analysts' forecasts, earnings levels, and earnings changes, for a sample of Australian, top‐500 firms, for the seven‐year period from 1994 to 2000.

The findings suggest there are systematic differences between firms reporting abnormal items and those with no abnormal items. Results show evidence that, on average, firms shifted expense items from pre‐abnormal earnings to bottom line net income through reclassification as abnormal losses.

The paper's findings suggest that the standard setters were justified in removing the “abnormal” classification from the accounting standard. However, it cannot be assumed that all firms acted opportunistically in the classification of items as abnormal. With the removal of the standardised classification of items outside normal operations as “abnormal”, firms lost the opportunity to use such disclosures as a signalling device, with the consequential effect of limiting the scope of effectively communicating information about the nature of items presented in financial reports.

The purpose of this paper is to investigate whether the special items (SI) mispricing reported in Burgstahler et al. is distinct from the accruals (ACC) mispricing documented in Sloan.

This paper employs the control hedge‐portfolio test, non‐overlap hedge‐portfolio test, and regression analysis to determine whether the SI anomaly is distinct from the ACC anomaly. In addition, the Mishkin test is used to examine the impact of SI on the ACC anomaly.

This paper has four main findings. First, one‐year‐ahead abnormal returns to the special‐items‐based hedge portfolio are much diminished when holding ACC constant, whereas those to the ACC‐based hedge portfolio remain significantly positive when holding SI constant. Second, the special‐items‐based hedge portfolio loses much of its ability to earn future abnormal returns without the help of extreme ACC, whereas the ACC‐based hedge portfolio remains profitable without the help of extreme SI. Third, SI are no longer negatively associated with future abnormal returns after controlling for ACC, whereas ACC remain negatively associated with future abnormal returns after controlling for SI. Finally, SI affect the extent to which the market overprices ACC, with negative (positive) SI aggravating (alleviating) ACC overpricing.

This is the first paper to show that the SI anomaly is dependent on the ACC anomaly.

Purpose – We investigate the impact of CEO turnover on performance and accounting-based outcomes following major business restructurings.

Design/Methodology/Approach – We analyze a sample of 217 major operational restructurings during the period 1999–2007 using regressions and other statistical tests.

Findings – We document significant improvements in postrestructuring operating and investment efficiencies with little differentiation between restructurings that involve a change in CEO and those that involve continuing CEOs. However, we find evidence of lower accounting quality for the continuing CEO firms. First, restructuring charges of CEO turnover firms are associated with lower current period unexpected core earnings and higher future period unexpected core earnings (lower levels of classification shifting). Second, CEO turnover firms have a significantly lower percentage of (i) restructuring charge reversals and (ii) prereversal shortfalls (in meeting analyst forecast estimates) followed by reversals (suggesting lower levels of subsequent earnings management). Therefore, turnover CEOs are less likely to manipulate restructuring charges to mask true economic performance than continuing CEOs. Overall, our evidence suggests continuing CEOs undertake less substantial restructurings, while opportunistically reporting similar charges and performance improvements, consistent with attempts to pool with new CEO hires to keep their jobs.

Originality/Value – Overall, our results highlight the key economic role played by top corporate managers in major business restructurings, suggesting that CEO turnover leads to both real changes in managerial actions and altered reporting incentives.

The purpose of this study is to identify the motivating factors that influence repeat participation among university student volunteers at a world-renowned food festival. The direct and indirection relationship (through attitude toward volunteering) was tested. Additionally, the moderating role of class standing between student volunteers' motivations, attitudes and repeat volunteer intention was assessed.

Researchers applied a quantitative methodology to data collected after the festival volunteering experience. The research team collected 205 useable surveys from university student volunteers at the Food Network and Cooking Channel South Beach Wine and Food Festival (SOBEWFF®). Structural equation modeling was used to test the relationships among volunteer motivations, attitude toward volunteering and intention to continue volunteering. Lastly, a multiple-group analysis was applied to test the moderating role of class standing.

The results showed the motivating factors purposive, personal enrichment and family traditions were significant in predicting attitude toward volunteering. These motivations did not significantly affect intention to continue volunteering; thus researchers found only an indirect relationship (through attitude toward volunteering) between volunteering motivations and intention to continue volunteering. Additionally, a positive attitude toward volunteering resulted in an intention to continue volunteering. Lastly, testing the moderating role of class standing revealed significant results on three pathways, indicating that students are motivated to volunteer differently based upon class standing (freshman through junior vs. senior, graduate).

The data were collected prior to COVID-19, and the ways in which COVID-19 has impacted the events industry and the scape of future events are yet to be determined.

Festival organizers and managers should appeal to different motivations of potential student volunteers depending on their class standing. For example, results of the moderator “class standing” indicated that the relationship between personal enrichment motivation and attitude toward volunteering was strongest and significant among freshmen, sophomores and juniors, but insignificant among seniors and graduate students. Thus, freshmen through juniors are more highly motivated to obtain practical experiences, and this motivation results in a positive attitude toward volunteering.

This study tests the moderating role of class standing to help predict intention to continue volunteering at a special event. The research is further unique by extending an understanding of the validity and reliability of the special events volunteer motivations scale.

This paper sets out to present a practical approach to develop an effective customer loyalty program by incorporating competition and heterogeneity in customers' preferences, and by avoiding the pitfalls associated with different types of loyalty programs.

To illustrate the approach, the paper presents a case study of T&T Supermarkets in Canada to show how a retailer can develop a cost‐effective customer loyalty program to retain and reward loyal customers so as to increase shopping frequency and shopping expenditure. The approach consists of four major steps, which are explained in detail.

Most T&T shoppers split their shopping trips at T&T (for Asian groceries and other specialty items) and a major competitor (for Western items). This creates a unique opportunity for T&T to develop a loyalty program that is intended to entice its loyal shoppers to increase their shopping frequency and expenditure at T&T. A “hybrid” reward structure was recommended to address the fact that there are two major segments of customers who prefer different types of loyalty rewards.

In addition to avoiding some common pitfalls of various loyalty programs, this paper presents a practical approach to develop an effective customer loyalty program by incorporating competition and heterogeneity in customers' preferences.