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The Impact Of Ceo Compensation Incentives On Financial Reporting Choices: Evidence From Potential Ghost Revenues Created In Mergers And Acquisitions, Jason A. Ashby

Doctoral Dissertations

When an acquirer purchases a target and assumes the target’s deferred revenue liability, accounting standards codification 805 requires that the acquirer recognize the target’s deferred revenue at its estimated fair value as of the acquisition date. If the target’s deferred revenue book value exceeds its fair value, the portion of deferred revenue written down will never be recognized as revenue for the acquirer under generally accepted accounting principles (GAAP). In this study, I investigate the impact of chief executive officers’ (CEOs’) compensation incentives on the fair value measurement of deferred revenue liabilities in acquisitions. If a larger proportion of CEO …