Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 13, 2023 erstellt
Description:
Financial statement users struggle to understand complex estimates. We examine whether increased disclosure around complex estimates aids financial statement users’ understanding of the underlying estimate. We use the adoption of ASU 2015-09, which required increased disclosure surrounding a material complex estimate for insurance companies, the loss reserve, to test our research question. We find that while firms' loss reserve disclosures became more comparable after ASU 2015-09, they also became more complex. The net effect of these disclosure changes negatively influences investors' ability to properly price insurers' loss reserves, indicating that the disclosures increased investor uncertainty surrounding this complex estimate. Our findings contribute to the disclosure and complex estimates literature and should be of interest to the FASB and SEC as they consider requiring increased disclosure in other complex areas of financial reporting