We study the effect of SFAS No. 90 on electric utilities that were required to record substantial write‐offs due to nuclear power plants that had been impaired by regulatory disallowances or abandonments. We identified 57 firms that recorded write‐offs required under SFAS No. 90 totaling $17.7 billion. During the period surrounding the release of SFAS No. 90, many of the affected firms reduced their dividends and their common stock earned somewhat lower returns than similar firms that were not affected by the pronouncement. However, we do not attribute these differences directly to SFAS No. 90. We identify other factors that are more plausible explanations for the lower returns and dividend reductions: adverse regulatory rulings that disallowed the recovery of nuclear construction costs and lower quality earnings because of large noncash “allowance for funds used during construction” (AFUDC) accruals. We believe that follow‐up studies comparing actual effects of controversial FASB pronouncements with those predicted during the board's deliberations are useful to both the board and those who lobby the board.

This content is only available as a PDF.
You do not currently have access to this content.