Knowledge that Transforms

The article discusses the additivity of net realizable values. Very little attention has been given to solving the problem of addition in current value accounting statements--adjusted historical cost, current replacement cost or net realizable value. With few exceptions, the implicit assumption has been made that as long as the items in the statement are measured in or adjusted to current terms, the addition will be valid. This assumption may be wrong at least part of the time particularly when applied to net realizable value. The realizable value of a group of assets will be computed as the maximum sum of the net realizable value of the various assets, the maximum level of aggregation before valuation being determined by the fact that a nonzero net realizable value must be derived from a verifiable market price. The objection might be raised that this computation for assets involves measurement of prices for assets or groups of assets followed by comparisons of these prices. The question of asset grouping must be answered satisfactorily before a net realizable value model can be completely developed and applied in general. The answer to this question will be provided through an examination of some general cases of asset interaction.

The article discusses behavioral sciences in the accounting curriculum. The author has outlined various approaches to introducing behavioral sciences material into the accounting curriculum. In recent years, interest in the relationships between behavioral sciences and accounting has increased. A decade ago, only a handful of teachers would have agreed that an accounting curriculum should consider concepts and findings from the behavioral sciences. Today the number of teachers concerned about integrating behavioral science concepts and knowledge into their accounting curricula is much larger. Most students in accounting are now studying the behavioral sciences. They do this because of wide ranging curricula in schools of business administration, requirements for graduation almost always include some psychology, sociology, organization theory, or other courses of study in what are called behavioral sciences. Therefore, one way with which questions of the relationships between accounting and behavioral sciences can be dealt is to merely maintain the status quo.

Reviews the book "The Use of Computers in Accounting," by Robert B. Sweeney.

The article discusses assessing prior distributions for applying Bayesian statistics in auditing. The results of this study suggest that auditors are willing to specify information from which prior distributions can be constructed. The prior distributions which were obtained, had most of the probability concentrated on small amounts of error, but there was considerable variability among them. It was found that there were substantial inconsistencies in the way some auditors specified information about the prior distributions. These inconsistencies and the variability among the prior distributions indicate that at least some of these distributions do not accurately reflect the auditors' beliefs about audit populations. Therefore, it is concluded that auditors should proceed with caution in relying on their prior distributions. To apply Bayesian techniques, the auditor subjectively evaluates the non-sampling evidence and expresses his belief about the audit population as a prior probability distribution. A likelihood function is then obtained by statistically evaluating the sample result.

ABSTRACT The relative effectiveness of a teaching machine and conventional lectures was studied in a controlled experiment in a portion of a tax accounting course. The nature of the teaching machine, the teaching problem, and the experimental design and controls are discussed. Subject to the limitations described, the results indicated that the lecture method provided greater immediate understanding, but that the teaching machine provided greater retention.

Reviews the book "Computers in Knowledge-Based Fields," by Charles A. Myers.

The article reports that at the micro-level, international accounting can be defined as accounting for firm-level business activity that crosses national boundaries or is conducted in a location other than the firm's domicile country. This definition excludes the study of foreign legal, political, economic and social environments except as these environmental elements affect the accounting function of the international business firm. It also excludes the study of accounting principles of a given country unless that study relates to international business activity. The study of comparative accounting principles is, however, an element of international accounting since it is related to transnational financial reporting for investors. International accounting encompasses all areas of accounting--managerial accounting, financial accounting, accounting theory, auditing and taxes. If these areas are to be covered from a multinational perspective, determining the content of the undergraduate course is indeed a primary consideration. Financial Accounting for International Operations has been included in the advanced accounting course. It includes accounting for foreign trade, foreign branches, and foreign joint ventures as well as translation of foreign subsidiary financial statements.

Reviews the book "Income Theory and Rate of Return," edited by J. Leslie Livingstone and Thomas Burns.

The results of the empirical research reported herein suggest that the consistency exception opinion does not appear to have information content for most investors. Investors either do not or are unable to deal with the subtle differences in the quality of the accounting data tested in this research. Some evidence which suggests that investors do utilize materiality criteria in examining data was found. The weakness of the evidence, however, makes this conclusion suspect. The evidence concerning the perceived information content of annual reports is mixed. In examining the annual report price profile, one finds no statistical significance on a weekly basis and infers no information content. This is consistent with the fact that other data sources may preempt the data disclosed through the annual report medium. Yet, on further examination of the annual report price profile, one finds an unusual plateau which suggests information content. Additional research is needed to provide a more definitive answer in this area. Based on the evidence presented in this study, the current burgeoning empirical interest in what data investors need and how investors use data should receive increased impetus.

The article focuses on the comparison of the responses in the barter case to those in the cash exchange and that no exchange cases revealed significantly more variation in the barter case. This could be interpreted as evidence that the conventional theory is incomplete. The discriminant analyses provided more direct evidence. First, in the book value versus market value analysis the author was unable to predict group membership from the situational variables. It appears that a minority, 23 percent of practitioners hold that the purchase rule, Book Value group should be applied to barters without regard to the situation. A majority 77 percent hold that either a sale or majority rule, Market Value group should be applied to barters. This division may be interpreted as the existence of two different conventional theories. Second, although one was able to identify a liquidity, acquisition and conservatism effect, the majority of the total variance remained unexplained. This may be interpreted as indicating that other implicit criteria exist which has not been identified.