"Value Relevance of Accruals Related to Nuclear Power Plants" (in Japanese)

This study investigates the value relevance of nuclear decommissioning costs and back end costs (nuclear recycle costs), which are accruals related to nuclear power plants in electric utilities. We analyze the association between those accruals and stock price levels at the end of fiscal year, based on earnings capitalization model. The findings of this paper are as follows. (1) Recognizing of decommissioning costs and back end costs contribute to increase the quality of earnings of electric companies. Off-balancing regulation, which compels not to recognize some portion of back end costs, distorts the quality of earnings. (2) Decommissioning costs and back end costs, which are measured by estimating of future payments, are value relevant. However, the contents of information differ each other. The result of OLS regression shows that decommissioning costs (back end costs) are positively (negatively) associated with stock price levels. (3) Though both discretionary decommissioning costs and discretionary back end costs are value relevant, two accruals have different information contents. Moreover, the value relevance of income-increasing (negative signed) discretionary accruals is different form that of income-decreasing (positive signed) discretionary accruals. (4) We cannot observe the signaling effect of discretionary accruals reported in some prior studies. (5) As to the back end costs, although in limited case, we find the conservative behavior of estimating the future payments. In Appendix, we detect the income smoothing strategy of electric companies by discretionary estimation of decommissioning costs and back end costs.