A Theory of Classification Shifting

This article demonstrates that managers can influence the market by classifying some items as core earnings and others as non-core. Investors react to classifications because managers have incomplete discretion over how to classify results. Managers optimally use their discretion to pool good news with items mandatorily classified as core earnings and bad news with items mandatorily classified as non-core. Aggregation reduces this temptation to classify strategically, provided managers also have incomplete discretion over how to aggregate. That is, managers can use aggregation to separate from strategic classifiers. Our results provide empirical implications for the cross-sectional properties of financial reports

A Theory of Classification

The decision to classify line items as special items or core earnings is designed to signal item persistence. Using information other than persistence, such as the sign of the line item, is known as classification shifting. Although classification shifting is widely seen as earnings management, we demonstrate in a simple classification and reporting game that the commonly observed reporting patterns arise when no misreporting occurs. In fact, signaling persistence rather than misreporting explains additional empirical findings that a misreporting story cannot address. Overall, strategic classification imposes a surprising amount of structure on reports, and we argue that it would be ill-advised to set policy based on a presumption that classification shifting is earnings management

A Theory of Principles-Based Classification

We study a firm's decision to classify transactions as recurring or nonrecurring in a setting with no fixed classification scheme, but with the following principle: recurring transactions must be more persistent than nonrecurring ones. Under this principle, equilibrium firm behavior provides a new explanation for the observed relationship between income and classifications. Moreover, we find that market prices are more informative under principles-based classifications than they would be under a hypothetical, optimally chosen specific classification rul

A Principle of Classification

We study a firm's decision to classify transactions as recurring or nonrecurring in a setting with no fixed classification scheme, but with the following principle: transactions classified as recurring must be more persistent than those classified as nonrecurring. This principle corresponds to existing classification standards. We find that the firm’s optimal classification strategy has a simple form: maximize the product of the (absolute) total of income-reducing nonrecurring and the total income-increasing recurring items. We characterize the possible firm values consistent with a report, and provide a measure of how opaque a firm’s valuation is given its classification choice

Australian consumer perspectives of teleaudiology (Kelsall-Foreman et al., 2024)

Purpose: The aim of this study was to investigate the perspectives of Australia-based hearing health care consumers regarding the (a) provision and utilization of teleaudiology services, (b) experiences with teleaudiology, and (c) barriers and enablers to future teleaudiology use.Method: A national prospective self-report online survey was completed between April and October 2020, amid COVID-19. Data were analyzed using descriptive statistics (closed-answer items) and content analysis (open-text responses). A total of 381 participants (Mage = 72.07 years ± 10.08, 142 females) were recruited from different states and territories of Australia.Results: Despite positive outcomes reported by those who undertook teleaudiology appointments during COVID-19, results indicate low-consumer teleaudiology uptake. It can be inferred that consumers were not aware of teleaudiology as an appointment option, clinicians/clinic staff had not informed and/or supported teleaudiology as an option, and biases existed that prevented teleaudiology being more widely adopted. It is unclear whether consumers who were eligible for government subsidies understood that teleaudiology appointments were reimbursed through government funding. Barriers to future teleaudiology uptake were largely related to concerns regarding confidentiality and privacy.Conclusion: Low consumer uptake of teleaudiology appointments appears to be driven by consumer preference for in-person services, which appears to be driven by lack of knowledge regarding the availability and effectiveness of teleaudiology.Supplemental Material S1. Survey.Kelsall-Foreman, I., Bacusmo, E. A. Z., Barr, C., Vitkovic, J., Campbell, E., Coles, T., Paton, M., Penno, K., & Bennett, R. J. (2024). Teleaudiology services in Australia: A national survey of hearing health care consumers amid the COVID-19 pandemic. American Journal of Audiology, 33(2), 518–531. https://doi.org/10.1044/2024_AJA-23-00113</p