Second, we provide evidence on two potential interventions that may help investors adjust for prior-period accounting changes. Our results indicate that a reconciliation is more effective than a simple non-quantitative disclosure overall but that both are
equally effective over longer time lags between the accounting change and subsequent judgment. Longer time lags encourage investors to rely more on memory-aiding disclosures, causing investors to adjust for prior-period accounting changes under longer time lags when those disclosures are available. Third, we contribute to the literature that considers how pension accounting approaches affect investor judgments. We provide evidence that changes in accounting for pensions made recently by some companies are likely to have significant effects over time under the accounting change disclosures required in current U.S. GAAP and IFRS. Given the current macro- economic environment, which we operationalize in our study, firms adopting fair value accounting may appear more attractive to investors than similar firms that don't adopt that accounting change. Our study also may provide insights to standard setters and practitioners . We provide evidence that accounting changes have multi-period effects on investor judgments, and that additional subsequent-period disclosures mitigate those effects. Standard setters and regulators could consider the costs and
benefits of requiring additional subsequent-period disclosures. Also, sophisticated investors or analysts could develop decision aids that approximate reconciliation or non-quantitative disclosures, regardless of any changes implemented by standard setters. Finally, while our study examines alternative subsequent-period change disclosures as remedies for this problem , an alternative would be for U.S. GAAP to adopt the approach to pension gain and loss recognition used in IFRS, which precludes smoothing amortization of these amounts to net income ( IAS 19.122 ).
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