APB, FASB, Power indices, Voting power

D. Paul Newman, [Discussion of The SEC's Influence on Accounting Standards: The Power of the Veto]: A Reply, Journal of Accounting Research, Vol. 19, Studies on Standardization of Accounting Practices: An Assessment of Alternative Institutional Arrangements (1981), pp. 170-173

Accounting standards, Standard setting process, SEC, Veto

Accounting data, Economist, Investments, Accounting methods

When Accounting Principles Board issued Opinion No. 14 it completed a full cycle in its atttitude toward classification of convertible securities. The Board concluded that no portion of proceeds from a convertible bond issue be accounted for as attributable to conversion features. 1 Its earlier position had been that the portion of proceeds attributable to conversion feature or warrants should be accounted for as paid-in capital. 2 The purpose of this paper is to question conclusion of APB 14 by comparing debt-equity distinction on basis of traditional criteria supported by some empirical evidence on conversions.3 The empirical data are examined in context of debt-equity distinctions as they are found in accounting, finance, investment, and legal literature. These distinctions are: (1) maturity date, (2) claim on assets, (3) claim on income, (4) voice in management, (5) maturity value, (6)

Accounting history, Public accounting

[Foreign exchange returns exhibit behavior difficult to reconcile with standard theoretical models. This article asks whether the recent findings of long swings in exchange rates between appreciating and depreciating periods affect estimates of the foreign exchange risk premium. We demonstrate how the "peso problem" introduced by expected shifts in exchange rate regimes can affect inferences about the risk premium in at least two ways: (1) it can make the foreign exchange risk premium appear to contain a permanent disturbance when it does not; and (2) it can induce bias in the foreign exchange return regressions such as in Fama (1984).]

Lawrence D. Brown, Gordon D. Richardson, Steven J. Schwager, An Information Interpretation of Financial Analyst Superiority in Forecasting Earnings, Journal of Accounting Research, Vol. 25, No. 1 (Spring, 1987), pp. 49-67

Using structural credit risk models to estimate default dependence requires estimates of correlations of changes in distance-to-default. We present a structural model that yields simple relations between asset value, distance-to-default, and CDS spreads, allowing the correlations to be estimated from CDS spreads. We generalize the model to include a randomly varying default boundary; in this version the distance-to-default dynamics also depend on the movement of the default boundary. The CDS spread correlations we estimate exceed equity correlations, consistent with a randomly varying default boundary. We also present evidence that variations in funding liquidity affect the correlations, consistent with recent models.