Disclosures, Financial reporting, Internationals study, Disclosure quantity

Prior to a comprehensive attempt to resolve many financial accounting controversies existing in United States,' more about interaction of accounting data with decisions made by known users of that data is needed. An attempt to acquire additional would be in line with implied decision-making criterion in American Accounting Association's statement that accounting is the process of identifying, measuring and communicating economic to permit informed judgments and decisions by users of information (emphasis supplied).2 In past few years, a number of accounting researchers have used behavioral field experiments as a means of investigating relationship between changes in methods used to gather and present financial accounting data and decisions made by specific users of that data.3 These researchers have generally concluded that decisions made by

M. Edgar Barrett, [Discussion of Accounting for Intercorporate Investments: A Behavior Field Experiment]: A Reply, Journal of Accounting Research, Vol. 9, Empirical Research in Accounting: Selected Studies 1971 (1971), pp. 79-92

ABSTRACT: In 1981, Congress enacted a "safe harbor" lease law that permitted firms to sell unneeded tax depreciation deductions and tax credits to other firms. During the effective life of the law, the Financial Accounting Standards Board (FASB) did not establish reporting or disclosure requirements for firms entering the safe harbor transactions. Because of this, many policies were followed. This paper examines the impact of this lack of reporting and disclosure guidance on the comparability and Interpretability of financial statements across firms involved in leasing. This study provides examples of problems the FASB might need to address when analyzing changes under the new tax bill.

Reviews the book "Accountancy and Economic Development Policy," by Adolf J.H. Enthoven.

Focusing on funds flow from operations, a way for analysts to use financial statement information to obtain additional insights when assessing a firm's cash generating ability is proposed. The method provides a clearer focus on a firm's cash generating ability from operations. Results from applying the proposed method are compared with information from traditional funds flow statements (APBO No. 19 and SFAS No. 95) for 20 firms, highlighting the incremental insights available.

ABSTRACT: This article reviews and evaluates the financial reporting of the federal income taxes of General Dynamics Corporation. Such a review illustrates the material discrepancies that can result between book income and tax return income using generally accepted accounting principles. It also raises doubts as to (1) the relevance of the current disclosure of "effective tax rates" in the income tax note to the financial statements, and (2) whether General Dynamics has fully reported its tax status in its annual reports. We believe that the FASB should require a more complete articulation of a corporation's tax status in its annual reports.

ABSTRACT: Several studies have hypothesized that economic consequences of mandated accounting procedures arise through impacts on firms' accounting-based loan covenants. However, this research has involved very little direct examination of the loan contracts. This study directly examines how public and private loan agreements were affected by an accounting procedure mandated by the SEC. It analyzes 24 loan agreements of 18 oil and gas firms that, as a result of an SEC requirement announced on May 6, 1986, recorded writeoffs of exploration costs for the first quarter of 1986. The principal finding is that, even for a mandated accounting procedure that caused both large financial statement differences and some technical violations of loan covenants, there were no observable economic consequences for the affected firms. This result casts doubt on the Importance of economic consequences of other mandated accounting procedures that might operate through affects on debt covenants.

ABSTRACT: Companies that use commodities as inputs (e.g., crude oil and coffee) often face inventory decisions in an environment of widely fluctuating prices. Under LIFO, the end-of-period decision to replace liquidated LIFO layers (or not) may dramatically affect cost of goods sold for both tax and financial reporting. In this paper, we first model the factors involved in the end-of-period decision to acquire inventory. We then apply this model in the context of the difficult situation faced by the management of the Farmer Brothers (coffee) Company in fiscal year 1977. The events reflected in Farmers Brothers' fiscal year 1977 financial statements reveal many of the economic factors involved in managing inventories recorded on a LIFO basis. The actual end-of-period decision reached by Company management is compared to plausible alternative actions. The analysis focuses on estimates of the effects of these alternative actions on cash flows and reported income as well as other factors that might have influenced management to increase the level of ending inventory in the face of declining prices.