What is it about?
This paper explores why bankers lobby for certain financial standards. Results suggest that bankers prefer accounting standards that allow flexibility to manage operating income. For loan receivables, bankers who appear to have managed the allowance for loan losses prefer measuring loans at historical cost with an allowance instead of fair value.
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Why is it important?
Standard setters seek input from preparers. They and others need to understand that preparer incentives play a significant role in their lobbying. Some of these incentives may be incompatible with the goals of standard setters.
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This page is a summary of: Agency problems, accounting slack, and banks’ response to proposed reporting of loan fair values, Accounting Organizations and Society, February 2014, Elsevier,
DOI: 10.1016/j.aos.2013.10.002.
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