Topic: Labor Costs of Implementing New Accounting Standards

Speaker: Zhongwei Huang

Date & Time: 9:30-11:00 Thursday, May 25, 2023

Venue: Tencent Meeting (Meeting ID: 229 941 391)

Organizers: School of Accounting, Dongbei University of Finance and Economics, P.R. China & Liaoning Capital Market Finance and Accounting Graduate Innovation and Academic Exchange Center

Abstract:

While much research focuses on the informational benefits of new accounting standards, the costs of implementing new standards remain unclear. We examine the adoption of two new major standards: ASC 842 leases and ASC 606 revenue recognition. We find an increase in the number of accounting job postings related to those standards as firms prepare to implement the new standards. Firms most affected by the new standards, measured by accounting complexity and early adoption behavior, post a higher number of accounting jobs. We estimate incremental labor costs at about 30 percent of median audit fees for each standard for the most affected firms. These costs, as a percentage of their total employee cost, are higher for smaller firms, indicating a greater regulatory-compliance burden. We provide large-sample evidence on the direct labor costs and thus on the lower bound of implementation costs associated with new accounting standards. Our findings should interest standard setters as they evaluate cost-benefit tradeoffs before issuing new standards.

Introduction of Speaker:

Zhongwei Huang, Associate Professor at the School of Management, Fudan University, with a doctoral degree from ESSEC Business School. The main research directions include accounting standard formulation, securities market regulation, and information intermediary. The research achievements have been published in journals such as The Accounting Review, Review of Accounting Studies, Journal of Corporate Finance, Journal of Business Finance & Accounting, Auditing: A Journal of Practice & Theory, etc.

Special Attention:

Please attend the lecture with real names. Strictly prohibit recording and public dissemination of the lecture content without permission from the author and organizer, violators may be investigated for legal responsibility.