Mental Accounting and Disaggregation Based on the Sign and Relative Magnitude of Income Statement Items

  title={Mental Accounting and Disaggregation Based on the Sign and Relative Magnitude of Income Statement Items},
  author={Sarah E. Bonner and Lisa Koonce},
Current financial reporting guidance allows managers flexibility as to whether to disaggregate income statement items. Such flexibility is problematic if managers prefer to aggregate in some situations and disaggregate in others because we conjecture that investors’ evaluations of firms will predictably differ depending on whether performance information is shown in an aggregated or disaggregated fashion. We conduct a series of related experiments within the context of compound financial… CONTINUE READING

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