Preserving amortized costs within a fair-value-accounting framework: reclassification of gains and losses on available-for-sale securities upon realization

SFAS No. 115 requires firms to recognize available-for-sale (AFS) securities at fair value with accumulated unrealized gains and losses (AUGL) recorded in accumulated other comprehensive income. Firms reclassify AUGL to net income when they realize gains and losses. We refer to the amount reclassified each period by "RECLASS.” As of 1998, SFAS No. 130 requires firms to present RECLASS prominently in their financial statements. We investigate the incremental explanatory power of RECLASS for banks' market values and market-adjusted returns. In the market value analysis, we control for AUGL, other components of book value of equity, net income before extraordinary items and RECLASS (NIBEXother), and other components of comprehensive income. In the returns analysis, we control for ΔAUGL, ΔNIBEXother, and extraordinary items. We find high positive coefficients on RECLASS in both analyses, consistent with investors pricing RECLASS as a relatively permanent component of net income. Exploring possible explanations for these pricing implications, we find no evidence that they are attributable to RECLASS remedying unreliable fair value measurement of AUGL. We provide three distinct analyses indicating that RECLASS's pricing implications are explained in significant part by it helping investors predict banks' future performance. Our results illustrate that an important type of amortized cost accounting information, realized gains and losses, remains highly useful to investors despite the overall fair-value-accounting framework for AFS securities

Methylation levels at IGF2 and GNAS DMRs in infants born to preeclamptic pregnancies

BACKGROUND: Offspring of pregnancy complicated with preeclampsia are at high risk for hypertension, stroke and possibly obesity. The mechanisms behind the association of intrauterine exposure to preeclampsia and high risk of health problems in the later life remain largely unknown. The aims of the current investigation were to determine the changes in DNA methylation at IGF2 and GNAS DMR in offspring of preeclamptic pregnancy and to explore the possible mechanisms underlying the association between maternal preeclampsia and high risk for health problems in the later life of their offspring. RESULTS: Umbilical cord blood was taken from infants born to women of preeclampsia (n=56), gestational hypertension (n=23) and normal pregnancy (n=81). DNA methylation levels of IGF2 and GNAS DMR were determined by Massarray quantitative methylation analysis. Methylation levels at IGF2 DMR were significantly lower in preeclampsia than normal pregnancy. The average methylation level at IGF2 DMR was significantly correlated with preeclampsia even after birth weight, maternal age, gestational age at delivery and fetal gender were adjusted. The difference in methylation level was not significantly different between mild and severe preeclampsia. The methylation level at GNAS DMR was not significantly correlated with birth weight, maternal age, gestational age at delivery, fetal gender, preeclampsia or gestational hypertension. CONCLUSIONS: We concluded preeclampsia induced a decrease in methylation level at IGF 2 DMR, and this might be among the mechanisms behind the association between intrauterine exposure to preeclampsia and high risk for metabolic diseases in the later life of the infants

Robust estimation of bacterial cell count from optical density

Optical density (OD) is widely used to estimate the density of cells in liquid culture, but cannot be compared between instruments without a standardized calibration protocol and is challenging to relate to actual cell count. We address this with an interlaboratory study comparing three simple, low-cost, and highly accessible OD calibration protocols across 244 laboratories, applied to eight strains of constitutive GFP-expressing E. coli. Based on our results, we recommend calibrating OD to estimated cell count using serial dilution of silica microspheres, which produces highly precise calibration (95.5% of residuals <1.2-fold), is easily assessed for quality control, also assesses instrument effective linear range, and can be combined with fluorescence calibration to obtain units of Molecules of Equivalent Fluorescein (MEFL) per cell, allowing direct comparison and data fusion with flow cytometry measurements: in our study, fluorescence per cell measurements showed only a 1.07-fold mean difference between plate reader and flow cytometry data

Estimating firm-level and country-level effects in cross-sectional analyses: An application of hierarchical modeling in corporate disclosure studies

Researchers in the field of international accounting are often confronted with observations of firms clustered into higher-level units such as countries. Using data from a corporate disclosure study including 797 firm observations from 34 countries, we demonstrate that the inferences obtained from the most commonly used Ordinary Least Square (OLS) test, which pools the firm and country data either under the disaggregation or aggregation approach, are problematic and misleading. To overcome the methodological limitation, we subsequently employ hierarchical modeling to simultaneously estimate both firm-level (within-country) and country-level (cross-country) disclosure determinants. We find that the clustering effects are significant in almost all firm-level variables. Once such effects are adjusted, only three firm-specific variables are significantly associated with corporate disclosure. Evidence provided by this study has important implications for most international accounting studies conducted in cross-level contexts.Disaggregation Aggregation Disclosure Hierarchical modeling

‐ 1 ‐ Historical-cost or Fair-value Accounting: Analysis of Banks ’ Reclassification of Unrealized Holding Gains and Losses for Marketable Securities

In this paper we study the reclassification of unrealized holding gains and losses for available-for-sale securities and cash-flow-hedge. These gains and losses, which have previously been recognized on a firm’s balance sheets, become part of the net income at the time of reclassification. We document a positive association between this reclassified amount and firms ’ stock prices. This finding suggests that the fair value accounting method for marketable securities does not incorporate all relevant information for valuation. We also document that firms reclassify substantially more gains than losses into the income statement for available-forsale securities. In contrast, the reclassified amounts of gains and losses are roughly even for cash-flow hedge. Analysis of future stock return further indicates that investors may be misled by the inflated amount of reclassified net gains for available-for-sale securities

Integrated Bioinformatics Analysis to Screen Hub Gene Signatures for Fetal Growth Restriction

Background. Fetal growth restriction (FGR) is the impairment of the biological growth potential of the fetus and often leads to adverse pregnancy outcomes. The molecular mechanisms for the development of FGR, however, are still unclear. The purpose of this study is to identify critical genes associated with FGR through an integrated bioinformatics approach and explore the potential pathogenesis of FGR. Methods. We downloaded FGR-related gene microarray data, used weighted gene co-expression network analysis (WGCNA), differentially expressed genes (DEGs), and protein-protein interaction (PPI) networks to screen hub genes. The GSE24129 gene set was used for validation of critical gene expression levels and diagnostic capabilities. Results. A weighted gene co-expression network was constructed, and 5000 genes were divided into 12 modules. Of these modules, the blue module showed the closest relationship with FGR. Taking the intersection of the DEGs and genes in the blue module as pivotal genes, 277 genes were identified, and 20 crucial genes were screened from the PPI network. The GSE24129 gene set verified the expression of 20 genes, and CXCL9, CXCR3, and ITGAX genes were identified as actual pivotal genes. The expression levels of CXCL9, CXCR3, and ITGAX were increased in both the training and validation sets, and ROC curve validation revealed that these three pivotal genes had a significant diagnostic ability for FGR. Single-gene GSEA results showed that all three core genes activated “hematopoietic cell lineage” and “cell adhesion molecules” and inhibited the “cGMP-PKG signaling pathway” in the development of FGR. CXCL9, CXCR3, and ITGAX may therefore be closely associated with the development of FGR and may serve as potential biomarkers for the diagnosis and treatment of FGR

Banks' Discretion Over the Debt Valuation Adjustment for Own Credit Risk

During our 2007 to 2015 sample period, firms recorded unrealized gains and losses on fair-valued liabilities attributable to changes in the firms’ own credit risk, referred to as the debt valuation adjustment (DVA), in earnings. Various parties criticized the inclusion of DVA in earnings as counterintuitive and manipulable. Using a small but comprehensive sample of European banks reporting nonzero DVA during this period, we decompose banks’ DVA into a normal portion explained by economic factors (e.g., changes in bond yield spreads) and an abnormal portion (the residual). Controlling for abnormal loan loss provisions (LLP) and realized securities gains and losses (RGL), we find that banks’ abnormal DVA is negatively associated with their premanaged earnings, consistent with banks exercising discretion over DVA to smooth earnings. We further find that banks that record larger LLP or RGL or that have histories of using LLP or RGL to smooth earnings are less likely to exercise discretion over DVA. These findings obtain in the financial crisis but not afterward. Collectively, our findings suggest that banks exercised discretion over DVA substitutably with discretion over LLP and RGL during the crisis. With the caveat that our analysis is limited by a small sample and the inherent difficulties of DVA decomposition, our findings have implications for how bank regulators and investors should interpret banks’ reported DVA, particularly in stress periods such as the crisis, and they provide support for the International Accounting Standards Board and Financial Accounting Standards Board’s (FASB) decisions to require firms to record DVA in other comprehensive income starting in 2018