Abstract Reviews the book "The Accounting Wars," by Mark Stevens.

Abstract Reviews the book "Economic Consequences of Financial Accounting Standards: Selected Papers."

Abstract ABSTRACT: This paper critically examines the development and current status of research on optimal tax depreciation decisions. It is shown that various researchers have derived piecemeal solutions to an existing decision model and have failed to reflect correctly important provisions of the income tax law. Questions are raised regarding the relative contribution of such studies to the stock of knowledge and the criteria for evaluating future research on optimal tax choices.

Abstract ABSTRACT: This paper brings to the accounting literature the results of recent research from other disciplines on a measure called duration and examines its potential usefulness in capital budgeting decisions. Duration is defined as the number of periods which elapse before the average present value dollar is received from a stream of cash flows. In this paper, the authors define duration and describe its major attributes. Its potential for assessing the risk of changes in required rates of return and the risk of illiquidity are then explored in a capital budgeting setting.

Abstract ABSTRACT: There are currently no definitive guidelines for reporting the current and noncurrent portions of lease obligations. Two possible approaches to this problem of allocation-the change in present value approach and the present value of the next year's payments approach--have been identified by Swieringa [1984]. This article addresses two aspects of this financial reporting issue. First, evidence is presented to show that the change in present value approach appears to be dominant in current financial reporting practice. Second, it is shown that adjustment of the reported financial statement numbers to those that would be obtained by the present value of the next year's payments approach does not affect the ranking of companies by a number of financial measures. These results suggest that the issuing of guidelines for reporting the current and noncurrent portions of lease obligations by the FASB is not warranted.

Abstract ABSTRACT: This research investigates the effects of delays by accounting policy-setters in reconciling the accounting treatment of stock options and stock appreciation rights (SARs). Comment letters to the FASB concerning Interpretation No. 28, observed SAR adoption practices, direct survey results from companies not adopting SARs, stock prices' reaction to the related accounting policy process, and the structure of SAR plans are analyzed. Analysis of the content of lobbyists' letters, descriptive statistics, t-tests, correlation coefficients, and an event study of related AICPA and FASB announcements are utilized. The evidence supports the hypotheses that the accounting treatment of SARs has deterred companies with stock option plans from adopting SARs, has deterred smaller companies from adopting SARs to a greater extent than it has deterred larger companies, has had a discernible "bad news" effect on the market, and has affected the form of those SAR plans which have been adopted. The recent advent of so-called "stock depreciation rights" may well lead to the elimination of SARs, largely due to the accounting treatment of SARs.

Abstract ABSTRACT: The information about corporate income taxes disclosed in annual reports has changed significantly since the issuance of Accounting Series Release No. 149 in 1973. Several important issues remain unresolved, however, including the measurement of income tax expense for multiple corporate entities, the application of the indefinite reversal criteria for certain differences between book and taxable income, and the disclosure of current income taxes when the deferral method of accounting for the investment credit is used. Examples from corporate annual reports are used in this article to identify underlying reasons for these reporting concerns, and proposals for improved disclosure are offered.

Abstract Illustrates the effects of both the purchase and pooling of interests methods of accounting for business combinations on post-combination financial statements. General rule for combining stockholders' equity accounts under the pooling of interests method; Exceptions to the general rule.

Abstract ABSTRACT: A model proposed by White [1981, 1984] for distinguishing bankrupt firms that successfully reorganize from those that liquidate is tested empirically in this study. Using probit analysis, two factors were found to have significant discriminating power: the proportion of assets not secured or pledged at the bankruptcy filing date (referred to as the free assets percentage) and the change in profitability In the years preceding bankruptcy. The probit model was able to classify accurately 69 percent of the firms in the estimation sample and 59 percent of the firms in a holdout sample.

[A model proposed by White [1981, 1984] for distinguishing bankrupt firms that successfully reorganize from those that liquidate is tested empirically in this study. Using probit analysis, two factors were found to have significant discriminating power: the proportion of assets not secured or pledged at the bankruptcy filing date (referred to as the free assets percentage) and the change in profitability in the years preceding bankruptcy. The probit model was able to classify accurately 69 percent of the firms in the estimation sample and 59 percent of the firms in a holdout sample.]