Knowledge that Transforms

Abstract Recently a study was conducted to determine some of the effects of accounting majors who take courses in their major field of study on the satisfactory-unsatisfactory grading basis. One by-product of the option originally intended to allow students a more free-ranging choice of courses and reduce some of the tensions arising out of the emphasis upon grade averages is that students majoring in accounting are scheduling courses in their major field on the satisfactory-unsatisfactory basis. This may be reducing some of the tensions arising out of emphasis upon grade averages, but it does not seem to encourage students to select courses outside their major academic areas. The study indicates that on average better students in terms of prior academic performance are choosing the satisfactory-unsatisfactory option. On average, these students did not perform as well as those students on the conventional grading system. Also, they did not perform to the full extent of their capabilities indicated by their previous grade-point averages, both overall and in accounting.

Abstract Reviews the book "Die kapitaltheoretische Bilanz und die Entwicklung der Bilanz-theorien," by Gerhard Seicht.

Abstract Reviews the book "Truth in Accounting," by Kenneth MacNeal.

Abstract This article presents an overview of the report of the Committee on Information System of the American Accounting Association. Accounting may be considered as a system with its own set of goals, activities, and resources or it may be considered as a subpart of the firm's information system. To considerable extent, developments in information and management theory and technology are making the boundaries between what is and what is not accounting increasingly dim. The Committee believes that two major developments have occurred in the information function. The first is the formalization of the information processes in many parts of the organization. Where before, informal department or process oriented records were kept, formally specified subsystems have been established which draw heavily upon developments in digital computer equipment, transmission facilities, information processing technology, and management science. These subsystems in turn are increasingly coordinated and developed as integrated parts of a common, total formal information system made possible by the second major development--the stored program digital computer. These two interrelated developments are changing the information and accounting functions.

Abstract The article analyzes the rationale of arguments that projectability should be a criterion for acceptance of income determination schemes on grounds that income prediction is relevant to investor decisions. The value formulations generally accept a neo-classical theory of value, and therefore income, in which "value" is the present value of, expected future cash flows. Income is the difference between these values at points in time excluding capital transactions and adding back dividend payments. Under this notion, income is an ideal, an immutable concept. Advocates of the development of meanings and operations for income determination, which are projectable, may contend that income prediction is well recognized as a tool of security analysis. The conditions under which any accounting income amount is functionally related to such events as future cash flows are largely unspecified. Therefore, the functional status of projectable income meanings and operations is indeterminate and independent of considerations of relevance.

Abstract Reviews the book "Business Combinations in the '60s: A Canadian Profile," by S.A. Martin, S.N. Laiken and D.F. Haslam.

Abstract A normative model of expected behavior was developed and used to evaluate the effects of measurement concepts on the investment policy decisions of trustees. Traditional concepts of trust income and trust corpus were compared with purchasing power concepts. It was found that traditional concepts affect investment policy decisions in three ways. (1) Defining income as cash dividends and interest could create constraints that would not allow the selection of a portfolio for the trust on the basis of risk-yield preference. (2) Constraints imposed by attempts to offset the effects of secular inflation could cause the selection of portfolios not considered optimal on the basis of risk-yield preference. (3) The differential tax features of securities can cause the selection of a sub-optimal port- folio in order to avoid appearing biased. Investment policy decisions under the purchasing power concepts do not appear to be affected by the first two constraints, but could be affected by constraints imposed by the differential tax treatment of securities; this would depend upon whether the distribution formulation considered tax effects. Many (if not most) state statutes would preclude this approach to the problem. Although this does not mean the statutes are preferable, the purchasing power concepts, though theoretically sound, are probably not capable of implementation under current conditions. It is possible, however, through direct specifications in the terms of the trust, to achieve many of the advantages that would be gained by utilizing purchasing power concepts. The primary advantage would be to free the trustee's investment decisions from constraints caused by the conflict of interests between life tenants and remaindermen.

Abstract Reviews the book "Accounting Principles and the City Code: The Case for Reform," by Edward Stamp and Christopher Marley.

Abstract This article examines the management of data collection and social exchange by accountants. Perhaps the most provocative element of this article concerns the degree to which the social exchange framework challenges the potency of the authority vested in the controllership role insofar as eliciting cooperation with requests for information. The skepticism with which this argument is typically received tells us a great deal about the expectations which attend data gathering efforts. What is significant about this set of attitudes is that our framework tells us that nothing is likely to have a more disrupting effect on an exchange than a mismatch in views as to the rights and obligations of each party to the exchange by way of the other. The very expectation on the part of financial managers as to the primacy of their activities and position is likely to impede their data gathering efforts. The misconception that appears to exist concerning the ability of the informant to avoid cooperation stems largely from another misconception--that managers are capable of framing sharp questions which cannot be avoided short of open defiance. In truth, the bulk of management's information requirements merely serve to provide sufficient background to permit the posing of the more penetrating substantive questions. It is the instrumental nature of management inquiry which provides the operating level with an ability to limit its cooperation.

Abstract Reviews the book "The Bureau of the Budget," by Percival Flack Brundage.