Disaggregated Financial Statement Comparability

This study develops a measure of financial statement comparability based on the disaggregated financial accounting components of earnings. The disaggregated financial statement comparability measure in this paper is contrasted with the aggregated (i.e., based solely on aggregate earnings) financial statement comparability measure used in prior research. The disaggregated framework allows for the measurement of comparability between two firms across multiple components of earnings, and enhances the ability to contrast a company's accounting system to that of other companies impacted by similar economic effects. This comparability measure is robust to a rigorous set of analyses, including tests of incremental informativeness, alternative specifications of comparability, and considerations regarding the information environment. The metric developed in this study extends financial reporting quality and financial statement comparability research based on its ability to capture the distinct components of earnings.