Knowledge that Transforms

Abstract The article reports that recently the Accounting Principles Board of the American Institute of Certified Public Accountants issued "Opinion No. 15," on earnings per share, which recommended that a dual presentation of earnings per share should be required and displayed with equal prominence on the face of the income statement. The first earnings per share figure, normally referred to as primary earnings per share, includes not only a weighted average of the common stock outstanding for the year but also considers certain securities to be the equivalent of outstanding common stock and therefore recognizes them in the computation of earnings per share if they have a dilutive effect. These certain securities are classified into four major groupings including convertible debt and convertible preferred stock, stock options, warrants and stock purchase contracts, participating securities and two-class common stocks and contingent shares. While some of the issues developed in this article will apply to all these dilutive instruments, more attention is given to convertible debt.

Abstract The article clarifies the complexities of the conceptual differences in the methods used to define or measure current value depreciation. Since depreciation is but one aspect in the total problem of income measurement, a brief examination of the purposes or uses of periodic income should be beneficial. The authors, within the confines of the purposes of income, attempt to clarify the concept of depreciation. Finally, given certain information about present prices and changes which have occurred in the structure of prices, a conceptual method for determining depreciation and other related factors affecting asset value changes will be illustrated. Income must be defined before it can be appropriately measured. Therefore, any definition of income must be based upon the intended usage of information generated. The user cost approach, while fundamentally different from replacement-value accounting, must be consistent with some measure of capital maintenance. Dependence upon subjective measurements such as present value of discounted services or estimated minimum cost per unit of output applicable to technologically improved assets is avoided.

Reviews the book "Program Budgeting and Benefit-Cost Analysis: Cases, Text and Readings," by Harley H. Hinrichs and Grame M. Taylor.

Abstract The article discusses the issues related to the correspondence between replacement cost income and economic income. The basic concern is centered on the ability of replacement cost income to approximate the results of economic income and thus provide statement users with information concerning changes in the cash flow potentialities confronting a firm. Previous researchers have suggested that theoretical study must precede empirical analysis of the predictive ability of particular income concepts. Since the presupposition of the indirect measurement hypothesis is that replacement cost income is a predictor of economic income, it seems appropriate to investigate the heretofore absent theoretical foundation for this contention. This article illustrates a conceivable inferential error which replacement cost reports might precipitate if Type B and Type C price changes are incorporated. One rationalization for the dissemination of replacement cost reports to investors relies on the validity of the indirect measurement hypothesis. Since investors and other statement users are concerned with firms' cash flow potentialities, it is imperative that accountants develop some external reporting techniques which will satisfy these needs for anticipatory information.

Abstract Changes in the economy have prompted changes in the information needs in all areas of accounting. New cause and effect relationships develop and new concepts emerge which must be given accounting expression. The accounting profession is therefore faced with a need for accounting data which must be accommodated. The magnitude of the challenge reveals the magnitude of the opportunity. There is every reason to believe that socio-economic accounting will provide the thrust necessary to tremendously expand the world of accounting. In this connection, there is an old Hindu saying which seems appropriate here, that "There is no door, but only a small window, that leads to a great new world." However, the saying requires a bit of paraphrasing for, actually, in this case, there is no window. Nevertheless, accounttants do have access to, perhaps, a key hole. The light provided by this small key- hole reveals that there are numerous answers to the challenges posed by socio- economic accounting and they all focus on research.

Reviews the book "The Efficiency of Business Enterprises," by Lloyd R. Amey.

Reviews the book "National Income and Economic Accounting," by William I. Abraham.

Reviews the book "Management Accounting: An Historical Perspective," by R.H. Parker.

Reviews the book "Financial Reporting in the Extractive Industries," by Robert E. Field.

Abstract Each year at the University of Michigan some 500 undergraduates in the fall term and another 300 in the spring enroll, for all sorts of reasons, in the Accounting course. almost none, then, has any thought of professional accounting as a career. Each student meets individually with an interviewer. Some interviewers are accompanied by assistants for at least a half hour, twelve students constitutes the maximum number handled by one interviewer during a full 9 A.M. to 5 P.M. day. Prior to the interview day each interviewer is supplied with a copy of his or her schedule and with a set of the data sheets for his group of students. At the next class meeting the students who had been interviewed are asked to fill out an appraisal questionnaire to provide with some notion of the degree of success of the program. Later a set of the questionnaire replies from his own group is sent to the interviewer. The program is repeated with very little modification during the second semester and a second chance to the students is given who had not participated when offered the opportunity during the first semester. A substantial number takes advantage of this opportunity.