Abstract Reviews the book "Accounting: The Language of Business," by Sidney Davidson, James S. Schindler, Clyde P. Stickney and Roman L. Weil.

Abstract Reviews the book "Accounting for Research and Development Costs," by Warren J. McGregor.

SFAS No. 2, R&D, Accounting changes, Firm size

Roland E. Dukes, Thomas R. Dyckman, John A. Elliott, [Discussion of The Economic Effects of Involuntary Uniformity in the Financial Reporting of R&D Expenditures and Accounting for Research and Development Costs: The Impact on Research and Development Expenditures]: A Reply, Journal of Accounting Research, Vol. 18, Studies on Economic Consequences of Financial and Managerial Accounting: Effects on Corporate Incentives and Decisions (1980), pp. 91-95

In October 1974, the Financial Accounting Standards Board issued FASB Statement No. 2, Accounting for Research and Development Costs (henceforth FAS2). The essence of the mandated accounting treatment is stated in paragraph 12 of the Statement: All research and development [R&D] costs encompassed by this Statement shall be charged to expense when incurred. This accounting treatment was contrary to the practice followed by many firms which capitalized and amortized R&D costs. The Board's definition of R&D costs is quite inclusive following, with some modifications, the commonly used interpretation by the National Science Foundation. The Board defines R&D, in paragraph 8, as follows:

Abstract This article presents information on some empirical result related to tax allocation and depreciation methods. The evidence indicated that deferral earnings had the highest association with security price changes. This unexpected finding is consistent with two rather different interpretations, either the market is efficient and deferral earnings is more consistent with the underlying information set impounded in security prices, or the market is inefficient in the sense that security prices reflect only the very narrow set of reported earnings numbers. Being intolerant of ambiguity, we conducted a further analysis, which attempts to explain a result we felt to be anomalous. In fact, the ratio will be equal to the internal rate of return on the asset. The analysis reported here discards the currently prevailing views of deferred taxes as a deferred credit or deferred liability and treats tax allocation arising out of differing depreciation methods for tax and reporting purposes as a form of depreciation.

Abstract This article presents information on some preliminary findings regarding the observed association between security prices and alternative income numbers, where the primary focus is upon the issue of interperiod tax allocation. The interperiod tax allocation controversy is an attractive research topic for several reasons. It is virtually impossible to resolve the controversy with traditional sorts of arguments. This is also true of many other measurement controversies in accounting and it is particularly obvious here. The controversy affects a large number of firms. Many other controversies tend to be of concern in only a few industries, while most firms have a deferred tax account. Although deferral is required, nondeferral income can be easily estimated from the financial statements. The association between the alternative earnings numbers and the behavior of security prices will indicate which method the market perceives to be the most related to the information used in setting equilibrium prices.