Knowledge that Transforms

Reviews the book "A History of Accounting Thought," by Michael Chatfield.

Reviews the book "Contemporary Issues in Cost and Managerial Accounting: A Discipline in Transition," edited by Hector R. Anton, Peter A. Firmin and Hugh D. Grove.

Whether the method of accounting for mergers affects the stock prices of the acquiring firm is investigated in this article. Many observers believe that companies using the pooling-of-interests method in an acquisition with positive goodwill enjoy higher stock prices because of the higher earnings they report when using this method. An efficient capital market, however, should be able to see through the particular accounting convention used to describe an event, such as a merger, and respond to the economics of the merger, not its accounting description The study analyzes a sample of pooling-of-interests mergers in the 1954-1964 period, and finds no abnormal price movements in the period surrounding the merger or the earnings announcements immediately after the merger. Conversely, some evidence of higher stock prices in the period preceding a merger for a much smaller sample of companies using the purchase method is found. The authors conclude that the pooling-of-interests method does not lead to abnormal stock price behavior for acquiring firms.

The article presets a reply from Arnold I. Barkman on the comment made by Richard K. Burdick and J. Hal Reneau on topics related to Within-Item Variation: A Stochastic Approach to Audit Uncertainty. Barkman assumes that the value that ultimately is associated with an item is not necessarily a fixed constant. He believes that measurement error and within-item variation are distinct concepts. Differing assumptions regarding whether values are fixed lead to differing perceptions of what an auditor sees when looking at an item. These differences also lead to differing definitions of terms that symbolically appear the same. Measurement error arises when repeated measurements of the same item yield different values. Barkman believes that the exchange of views regarding the nature of values has clarified some of the assumptions underlying his article. However, Barkamn do not believe that what Burdick and Reneau have done has resulted in a refinement of his approach, since their formulation reflects a view of the nature of values much different from that of Barkman.

Reviews the book "The Measurement of Corporate Social Performance."

Reviews the book "Modern Management Accounting," by Tom Nelson and Paul W. Miller.

Reviews the book "C.P.A. Law Review," 5th ed., by Joseph L. Frascona.

Reviews the book "Current Cost Accounting: The Index Number Problem," by K.V. Peasnell and L.C.L. Skerratt.

This article examines the effects of alternative planning models and accounting variance analysis techniques on a firm's profit and sales performance. Two multiple objective product-mix models, a satisficing goal programming model and an optimizing multiple objective linear programming model, are developed within an uncertain demand situation. Two accounting control systems, a traditional standard cost variance analysis and an ex post variance analysis, are also investigated. A computer simulation experiment is conducted, and F-tests, as well as a multiple-ranking procedure, are used to analyze the simulated results. The simulation results show that profit and sales under multiple objective linear programming are higher than those under goal programming. When comparing ex post variance analysis with traditional variance analysis, the former results in hgher sales, but there is no significant difference in profits. Possible reasons for this is explored and a sensitivity analysis was conducted.

Reviews the book "The Federal Income Tax--Its Sources and Applications," 4th ed., by Clarence F. McCarthy.