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The Financial Accounting Standards Board requires separate reporting of discontinued operations within the income statement to provide better information about companies’ future earnings for financial statement users. However, discontinued operations can increase the complexity of forecasting earnings because a portion of permanent earnings is being eliminated, the future effect on continuing operations may be unclear, and there are incentives for opportunistic reporting. Additionally, anecdotal evidence also shows that analysts, an important proxy for financial statement users, have difficulty in adjusting their forecasts when companies report discontinued operations. This study empirically examines whether reporting of discontinued operations affects analyst earnings forecast accuracy. Our results suggest that forecast accuracy initially declines following the reporting of discontinued operations, and the effect is more pronounced for firms with lower quality discontinued operations disclosures. Results also show the initial decline in forecast accuracy dissipates after a year and is concentrated in firms with potentially more opportunistic reporting within discontinued operations.

Financial Accounting Standards Board Interpretation No. 48 (FIN 48, FASB 2006) allows discretion regarding the income statement classification of interest and penalty expenses for unrecognized tax benefits (UTBs). We investigate whether tax avoidance, management compensation, and debt agreements affect the expense classification election and whether this discretion has implications for financial statement users. We find firms that engage in tax avoidance activities, measured by effective tax rates (ETRs) and involvement in tax disputes, are more likely to include interest and penalties in tax expense. We also find that interest and penalties are more likely to be classified as tax expense when CEO compensation is more sensitive to pre-tax income. Finally, we find that UTB interest and penalty expense classification is associated with analysts' ETR forecast accuracy, which suggests there is a potential unintended consequence related to decision usefulness of FIN 48 reporting due to expense classification discretion.

SUMMARY This article summarizes “The Association between Characteristics of Audit Committee Accounting Experts, Audit Committee Chairs, and Financial Reporting Timeliness” (Abernathy, Beyer, Masli, and Stefaniak 2014), which investigates the association between audit committee members' accounting expertise and financial reporting timeliness. While we find a positive relation between audit committee accounting expertise and financial reporting timeliness, interestingly, we also find that accounting expertise gained from public accounting experience is associated with more timely financial reporting than accounting expertise gained from CFO experience. We discuss implications of these findings for auditors, companies, and regulators.

We investigate the association between audit committee (AC) members' financial expertise and financial reporting timeliness, and extend the discussion by investigating how the source of accounting expertise (e.g., public accounting or CFO) differentially influences financial reporting timeliness. We predict and find that AC accounting financial expertise is associated with timelier accounting information. Further, we find that accounting expertise gained from public accounting experience is associated with timelier financial reporting; however, accounting expertise gained from CFO experience is not. We also find that AC chairs (ACCs) with accounting expertise from public accounting experience are significantly associated with timelier financial reporting while ACCs with CFO-sourced accounting expertise are not. Our results are important for two reasons. First, our results suggest that AC accounting financial expertise contributes to AC effectiveness by improving the timeliness of financial information. Second, our findings highlight how personal characteristics of accounting financial experts influence contributions toward AC effectiveness.