Does SFAS No. 151 Trigger More Overproduction?

ABSTRACT

This study explores whether SFAS No. 151 affects firms' production-level decisions. Although the change from ARB No. 43 (FASB 1953) to SFAS No. 151 (FASB 2004) seems trivial at first glance, using a sample of U.S. manufacturing firms from the Compustat database (SIC 2, 3) for the period 2003–2008, we document that abnormal production costs significantly increased after SFAS No. 151 became effective in 2005. The empirical evidence substantiates ...more