The Effect of Uncertainty About Future Accounting Standards on Financial Reporting Quality.

This article investigates how uncertainty about future accounting standards—termed "standard-setting uncertainty"—affects financial statement preparers' reporting behavior and decision processes. Through an incentivized experiment involving graduate accounting students, the study finds that such uncertainty leads preparers, who have financial incentives to bias estimates, to report with less bias and to exhibit greater sensitivity to measurement imprecision, indicating increased focus on estimate accuracy. These behavioral effects occur despite unchanged wealth-maximizing strategies, suggesting that uncertainty influences preparers' judgment beyond rational incentive responses. The findings imply that the uncertainty inherent in a deliberative and inclusive standard-setting process may unintentionally enhance financial reporting quality by reducing biased reporting and improving preparers' decision-making.