Knowledge that Transforms

It seems desirable-prudent might be a better word-to begin by explaining my presence on this platform. I might as well begin with an explanation because I have a suspicion that there will be an insistent demand for one by the end of this talk. Some months ago Sid Davidson came into my office. After some chitchat obviously designed to put me at ease, he mentioned this conference and, with beguiling candor, confessed that he was having some difficulty in locating a dinner speaker. It was also apparent that his failure was not due to any lack of effort. Indeed, I gained the distinct impression that he had approached nearly every one of the 58,459 members of the American Institute. Then-and I thought I heard a small mournful sigh-he said: How about you? Naturally, I was flattered to be invited to address this august assembly; but I think that I was really trapped into an acceptance by the growing panic in Sid's eyes. He simply had to complete the program quickly because he was about to embark on one of those overseas missions which involve many educators that the U.S. campuses must often resemble ghost towns. Well, that is how I came to this platform. The whole episode reminded me of an observation by Don Marquis' Archy the cockroach, who said of a friend that he was so unlucky that he ran into accidents which started out to happen to somebody else. This speech also started out to happen to somebody else; but I am not certain who is the greater victim of the accident: the speaker-or the audience. At this point, I must digress for a moment to reassure the academic traditionalists among you that the preceding paragraph in the official text of this address carries a symbol directing attention to a numbered footnote citing the source of that quotation from the erudite cockroach. As a matter of fact, I can add with some pride that the first footnote is

In recent years there has been a growing interest in the application of behavioral science procedures to managerial accounting procedures. However, it is becoming increasingly apparent that the usefulness of the managerial accounting procedures in planning and controlling business operations depends to a great extent upon effective human relations. There have, been several studies emphasizing the psychological effect of various phases of budgeting which provide background for the research reported in this paper.' Since the control phase of managerial accounting necessarily points out individual efficiency and inefficiency, the psychological impact on the individual is profound. Becker and Green stated that feedback of performance results is essential for good morale; it is imperative for each participant to know whether he should feel success or failure. Communicating knowledge of results acts, in this case, as reward or punishment. It can serve either to reinforce or extinguish previous employee behaviors. 2 The empirical research reported in this paper is the first part of a two-phase study of the psychological effect of performance reports. This experiment was designed primarily to test the psychological impact of frequency of feedback. Three groups of students participated

Philip Brown, Ray Ball, Some Preliminary Findings on the Association between the Earnings of a Firm, Its Industry, and the Economy, Journal of Accounting Research, Vol. 5, Empirical Research in Accounting: Selected Studies 1967 (1967), pp. 55-77

Depreciation, Cost allocation, Asset valuation

The question I am concerned with in this paper is the following: Is it possible to predict whether a merger will be accounted for as a purchase or as a pooling? Different predictors have been suggested in accounting literature; how do they compare in terms of their forecasting ability? If the accounting treatment is predictable, it may be possible to infer the decision rule that underlies the choice of treatment. Such knowledge would facilitate the interpretation of accounting data and suggest criteria to appraise auditing procedures. The question is important for the public accounting profession. Let us consider two possibilities: suppose we examine the population of reporting decisions made by business firms and find that the distribution behaves as if decisions were generated by a random process. One possible explanation would be that business men, as a group, do not really consider reporting decisions to be important, and accountants would then have to reconsider their own basic assumption, that reporting decisions have a discernible influence on the behavior of capital markets. Alternatively, let us assume that capital markets impose severe penalties upon firms which do not their reported income. Then, we would expect executives to behave accordingly and we should be able to uncover evidence of such smoothing behavior. Recommendations leading to an increase in the variability of reported earnings would have little chance of being followed.' It has been argued that managers of large firms smooth reported income in order to keep the stockholders happy.2 Such behavior has been

Books partly or wholly devoted to giving instruction in the art of keeping accounts date from 1494 when Luca Pacioli's Summa was published in Venice. It is reasonable to suppose, however, that manuscript expositions of bookkeeping were in existence before then, for use within commercial schools, by individual instructors, or possibly for circulation among those interested in acquiring mercantile knowledge. Several early manuscripts on other aspects of mercantile practice have survived,' but only one which includes some discussion of bookkeeping is known to us, although not in its original form. Manuscripts on bookkeeping continued to be written and presumably used even after the first books on the subject had been published. It may be assumed that these were compiled by their writers for the limited purpose of instructing their own pupils, though no doubt they came to the notice of others. In this article the various manuscripts on mercantile accounts of the fifteenth and sixteenth centuries are described and discussed.2 Its scope

Debt accounting, Liquidity, Uncertainty, Present value of Debt

Investment credit, Taxation, Income tax, Institutional environment