China Science » Economics, Econometrics and Finance

Multiple dimensions of accounting in the development of GAAP

admin — Tue, 16 Sep 2008 23:44:02 +0000

The phrase ‘accepted accounting principles’ underlying financial statements is a forerunner of today’s accounting standards. Here, it is argued that history shows that the term ‘principles’ is often most vague in debates on the development of those standards. The reasons for; consequences of that vague use are varied; complex. This article provides insights not highlighted in earlier analyses of the periods reviewed. While debates like the rule- versus principle-based standards are set up as two-dimensional, the many dimensions of accounting often allow argument to be easily diverted. The debate/argument thus remains unresolved. For progress to be achieved in the establishment of accounting standards the many dimensions of accounting must be acknowledged; attempts to divert debate minimized. Those with a stake in the development of accounting standards need to consider the total scene of the related accounting. In a particular debate, dimensions under scrutiny must be stated, with any others in that total scene being acknowledged even if kept constant. 2008 Accounting Foundation.

Staunton, J.J.Email:j.staunton@econ.usyd.edu.au
University of Sydney

George R. Husband: Contributions to the development of accounting thought

admin — Tue, 16 Sep 2008 23:43:32 +0000

George R. Husband, accounting educator, was a leader in research, service; teaching. His former students; admirers endowed a chair, three scholarships; an annual lecture series in his memory nearly forty years after his death in 1958. This article highlights his lasting accomplishments by examining his research (e.g., as an opponent of the LIFO method of inventory valuation, an advocate of price-level accounting; major proponent of the proprietary theory of financial accounting,; as one of the most prolific authors in The Accounting Review), service (e.g., as Vice President; President of the American Accounting Association); teaching. We also discuss Husband’s research in the context of other notable contemporary scholars; those whose works are consistent with Husband’s thoughts. 2008 Accounting Foundation.

Reinstein, A.a Email:a.reinstein@wayne.edu, Alvin, G.[a] , Vangermeersch, R.G.[b]
[a]Department of Accounting, School of Business Administration, Wayne State University;[b]Department of Accounting, College of Business Administration, University of Rhode Island

Prospects: A missing piece of current selling price reporting

admin — Tue, 16 Sep 2008 23:43:00 +0000

This article seeks to provide insights about a conceptual objection to current selling price reporting: that, in its determination of asset amounts, such reporting ignores the reporting entity’s prospects (potential, promise, outlook) for achievement of possession of or of access to consumer general purchasing power beyond its achievement to date of such possession or access. The article argues that financial reports should provide (a) information that is helpful to the users to evaluate the prospects of the reporting entity, including financial statement information based on current selling price reporting, (b) a section of the income statement presenting amounts spent during the reporting period to enhance the reporting entity’s prospects,; (c) various kinds of supplementary information to aid the evaluations, such as the kinds discussed in this article. 2008 Accounting Foundation.

Rosenfield, P.Email:paulrfield@earthlink.net
Accounting Standards Division, American Institute of Certified Public Accountants

Making management auditable: The implementation of best value in local government

admin — Tue, 16 Sep 2008 23:42:22 +0000

This article examines the implementation of Best Value – an audit tool of the U.K. government’s modernization policy – in local government, specifically in Scotland. This is a study of the impact of this key concept, primarily on the management of these public services. The aim of Best Value Audit is to enhance transparency; accountability of management actions in local government. The article draws on Power’s (1997) Audit Society thesis to inform this research. The Best Value approach has been heavily influenced by audit processes; oversight bodies both in its design; implementation. This article supports the Power thesis of the Audit Society: It reveals the manner in which audit practices are deployed by agencies of central government with the intent to shape the management of local government. 2008 Accounting Foundation.

Arnaboldi, M.a Email:michela.arnaboldi@polimi.it, Lapsley, I.[b]
[a]Dipartimento di Ingegneria Gestionale, Politecnico di Milano;[b]Institute of Public Sector Accounting Research (IPSAR), University of Edinburgh

Corporate transparency, financial development; the allocation of capital: Empirical evidence

admin — Tue, 16 Sep 2008 23:41:19 +0000

There is controversy regarding the role of financial development in promoting economic growth. Lucas (1988) suggests that the role of financial intermediation in economic growth has been very badly over-stressed in the popular; professional discussion. Levine et al. (2000), on the other hand, show that in a cross-country setting the exogenous component of financial intermediary development is positively; robustly linked to economic growth. Although empirical methodologies to investigate the finance-growth nexus have been refined, there is a lack of understanding about the exact mechanisms through which the financial system could affect economic performance in the real sector. Wurgler (2000) investigates one such mechanism of economic growth: whether capital is allocated efficiently. He then empirically shows that countries with well-developed financial architecture improve capital allocation. This article extends Wurgler (2000) by investigating the role of an important economic institution, the financial reporting system, on the efficiency of capital allocation. Financial reporting provides the primary source of independently verified information to the capital providers about the performance of managers; facilitates efficient resource allocation decisions. Results show that financial transparency is positively; significantly related to capital allocation efficiency. Further, this result holds after controlling for the impact of stock price synchronicity, state-owned enterprises; investor protection rights. 2008 Accounting Foundation.

Habib, A.Email:ahsan.habib@aut.ac.nz
Department of Accounting, Auckland University of Technology

To fair value or not to fair value: A broader perspective

admin — Tue, 16 Sep 2008 23:18:43 +0000

Fair value is considered here with respect to the two primary objectives of financial statements proposed in the joint conceptual framework that is under development by the FASB; the IASB, namely (a) informativeness – to assist providers of capital in predicting, evaluating,; comparing the amounts, timing; uncertainty of future cash flows,; (b) stewardship – to assist in evaluating how efficient; effective managers have been in enhancing shareholders’ value. More specifically, a comprehensive set of accounting measures; a set of corporate governance reforms intended to align corporate insiders’; auditors’ behaviour; decisions with the interests of investors is outlined. Suggested reforms show how to present a mix of effectively historical quantifications, exit values,; the discounted values of future cash flows expected from the particularized use of combinations of assets within the firm. Additionally, the article describes how markets can be reformed in order to align the interests of the officers who prepare such accounts,; the auditors who certify them, with those of investors. These market-based reforms would require auditors to insure misrepresentations,; managers to take equity to induce truthful reporting. Also included is a radical extension to earlier proposals by the author, requiring an officer of the company to make the market in shares in a way that would place limits upon the value of the insider’s private information. 2008 Accounting Foundation, The University of Sydney.

Ronen, J.Email:jronen@stern.nyu.edu
Stern School of Business, New York University

Fair value; the IASB/FASB conceptual framework project: An alternative view

admin — Tue, 16 Sep 2008 23:16:56 +0000

This paper analyses various controversial issues arising from the current project of the IASB; FASB to develop a joint conceptual framework for financial reporting standards. It discusses their possible implications for measurement;, in particular, for the use of fair value as the preferred measurement basis. Two competing world views are identified as underlying the debate: a Fair Value View, implicit in the IASB’s public pronouncements,; an Alternative View implicit in publicly expressed criticisms of the IASB’s pronouncements. The Fair Value View assumes that markets are relatively perfect; complete; that, in such a setting, financial reports should meet the needs of passive investors; creditors by reporting fair values derived from current market prices. The Alternative View assumes that markets are relatively imperfect; incomplete; that, in such a market setting, financial reports should also meet the monitoring requirements of current shareholders (stewardship) by reporting past transactions; events using entity-specific measurements that reflect the opportunities actually available to the reporting entity. The different implications of the two views are illustrated by reference to specific issues in recent accounting standards. Finally, the theoretical support for the two views is discussed. It is concluded that, in a realistic market setting, the search for a universal measurement method may be fruitless; a more appropriate approach to the measurement problem might be to define a clear measurement objective; to select the measurement method that best meets that objective in the particular circumstances that exist in relation to each item in the accounts. An example of such an approach is deprival value, which is not, at present, under consideration by the IASB. 2008 Accounting Foundation, The University of Sydney.

Whittington, G.Email:gw12@cam.ac.uk
Department of Financial Accounting, Centre for Financial Analysis; Policy, University of Cambridge