Title: A cautionary alert - limited investors' guidance by small companies: as evidenced by FIN 48 related Topic 11.M disclosures within micro cap firms

Authors: Linda Campbell; Marshall K. Pitman

Addresses: Texas State University, 601 University Dr., McCoy #449, San Marcos, TX 78666, USA ' The University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249-0632, USA

Abstract: The purpose of this study is to assess the factors associated with investor guidance required by SAB 74 (codified as SAB Topic 11.M) by 206 micro cap firms as they implement FIN 48. Logistic regression results support, overall, the expectation that industry affiliation is a significant predictor of the presence (or absence) of reliable investor guidance provided prior to FIN 48 adoption. On the other hand, the number of open tax years and the obligation of multi-state income tax reporting are not statistically significant predictors. Having an in-house tax department plays a significant role as a predictor of FIN 48 related Topic 11.M investor guidance. Corporate governance was found to be moderately significant in this prediction. This information may provide tax and SEC regulators, investors, managers and other interested parties with insight into possible issues micro caps may face as other major changes to the financial reporting arena are encountered.

Keywords: FIN 48; Topic 11.M; micro caps; investor guidance; corporate governance; in-house tax departments; financial reporting; micro cap firms; small firms; USA; United States; accounting rules; investment guidance.

DOI: 10.1504/IJAAPE.2015.068863

International Journal of Accounting, Auditing and Performance Evaluation, 2015 Vol.11 No.2, pp.107 - 129

Received: 16 Jul 2013
Accepted: 19 Jun 2014

Published online: 14 Apr 2015 *

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