China Science » Abacus

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

Customer Profitability Analysis Reports for Resource Allocation:The Role of Complex Marketing Environments

admin — Mon, 23 Jun 2008 01:08:51 +0000

Most decision making research in management accounting remains focused on cost information in a production context. Little is known on the relevance of customer profifitability analysis (CuPA) reports, which more accurately reflect revenue and marketing support variations acrosscustomers, for marketing decisions. This study uses an experimental design to examine the impact of such reports on resource allocation decisions (that affect the firm’s profits) in marketing environments varying in complexity. The main result of the experiment suggests that the value of CuPA reports depends on the complexity of the marketing setting. Only in a highly complex marketing setting do they enhance resource allocation decisions and resultant firm profitability. Conversely, in the simple marketing environment, decision makers can combine their traditional volume-based cost data with other available types of feedback to perform as well as under a more accurate CuPA report. These findings on complexity contrast with those of a prior study in a production context ( Gupta and King, 1997). It is argued that improvements in the current research design, in the form of regularly updated profitability reports and concerning accuracy, increase the relevance of CuPA reports in a complex marketing setting.

EDDY CARDINAELS　FILIP ROODHOOFT　LUK WARLOP

Corporate Lobbying on Accounting Standards:Methods, Timing and Perceived Effectiveness

admin — Mon, 23 Jun 2008 01:05:47 +0000

There is a long-standing concern in the literature about the potential importance of non-observable forms of lobbying that may be used by corporate managers to influence accounting standard setting bodies. To date, however, no study has documented their nature or their volume. This study provides such evidence in the context of the U.K.’s Accounting Standards Board (ASB) standard setting process for the period 1991-96. It also provides evidence with respect to the timing at which lobbying activity takes place and its perceived effectiveness by corporate managers. The findings suggest that companies use a variety of lobbying methods, including appeals to their auditors and private meetings with ASB members and staff. Importantly, however, the use of these methods is significantly associated with the use of comment letters; companies which submit comment letters are much more likely to use other methods than companies which do not. Other findings suggest that more companies lobby during the stages of the ASB process at which public consultation takes place (e.g., exposure period of a discussion paper) than at the earlier stages of the process (e.g., agenda formation) which are considered in the literature as the stages at which lobbying can be most effective. With respect to the perceived effectiveness of lobbying, companies which lobbied the ASB considered lobbying to be more effective than companies which did not.

GEORGE GEORGIOU

Political Influence and Coexistence of a Uniform Accounting System and Accounting Standards: Recent Developments in China

admin — Mon, 23 Jun 2008 01:02:24 +0000

This article investigates the role of political influence, as well as accounting tradition and the equity market, in China’s recent changes in accounting regulation. We find that the Chinese government, in part self-motivated and in part under external pressure, has been active in developing accounting standards in harmony with international accounting standards. However, it has retained a uniform accounting system in the Enterprise Accounting System issued in 2000 to accommodate the special circumstances of a transforming government, strong state-ownership, a weak accounting profession, a weak and imperfect equity market, and the inertial effect of accounting tradition and cultural factors. This article also contributes to existing models of accounting system classification by illustrating the need for considering political influence as a factor that affects the rate of transition towards full implementation of international accounting standards.

JASON ZEZHONG XIAO　PAULINE WEETMAN　MANLI SUN