Knowledge that Transforms

R&D, R&D accounting, Expense R&D, Amortization of R&D

Depreciation, Valuation, Accounting History

Income tax, Tax allocation, Depreciation, Cyclical asset expenditures

Published accounting reports-the balance sheet, income statement, and funds statement-are prepared for the use of investors, creditors, and others with whom the accountant is not in direct contact. It is therefore difficult for him to determine which data they find useful. Consequently, several arguments have arisen as to which data are the best. Examples of these competing theories are the current operating performance concept versus clean surplus, price level versus historical cost depreciation, and sales versus cash flow versus net income. Even if accountants knew which constructs were best, other questions would remain. For example, are the annual data published in corporate reports used by investors to make decisions? Do quarterly reports add useful information? Most corporations publish comparative data that date back many years. Do stockholders use these past data? This paper seeks to answer some of these questions by determining, empirically, which published data are used by investors, as reflected by changes in the market price of common stocks. To provide a meaningful test, the relationship between common stock prices, published accounting information and other factors is specified first. Then models are developed that describe how investors may use, published accounting data. Finally the model is tested with relevant data, and conclusions are drawn.

Price variation accounting, Price-level adjusted accountings, Net income, Time value of money

Liability, Deferred revenue, Breakage, Accrued expense

At the close of such a conference as this, it is appropriate that the critical synthesis be as noncritical as possible. Each of the papers has been dissected; what is necessary at this point are some vacuous well-meaning comments that no one can take umbrage at. To ensure getting comments like these requires selecting someone who is certain not to understand the papers. This does not become a formidable obstacle, because the probability of success is very high if the person selected is one with full professorial rank. My first comments will be directed to the title. Question has been raised as to what empirical research is. To answer this I would like to commence with a possible definition of research, namely that research is the formulation and testing of hypotheses with the aim of understanding and predicting behavior. If this definition is accepted, then it is impossible to classify any endeavor as research unless it is empirical. Hypotheses may be stated without observation or experiment but they cannot be tested in a nonempirical fashion. It has been said that one feature of the Renaissance was the replacement of medieval theorizing by research. If this is true, accounting may be said to be in the renaissance period. Up to this time hypotheses have been formulated (any proposal for a change in accounting methods is basically a hypothesis that the use of the proposed accounting method will have some kind of desirable results-the exact nature of these is frequently not stated), but hypothesis testing has been rare. The only possible reason to use the term empirical research for the papers presented here is to point out to the person accustomed to use the term research in a loose sense that these are research papers in the proper sense. These papers are on empirical research in accounting. Accounting,

Accounting, Accounting Methods