Knowledge that Transforms

Reviews the book "Business Data Processing," by Elias M. Awad.

Reviews the book "Taxation of the Closely-Held Corporation," by Theodore Ness and Eugene L. Vogel.

The article discusses the statistical criteria for asset valuation by specific price index. The major theoretical studies of current cost asset valuation in financial reporting rely to some degree on specific price indexes, but have left unsettled certain key issues in implementation. A survey of published implementation studies shows indexes as the dominant adjustment method. This article makes a limited investigation of the potential for measurement of individual asset valuation by specific price indexes for machinery and equipment from the Wholesale Price Index (WPI). The WPI offers the best available source of price indexes to illustrate adjustment procedures. The net overall asset valuation adjustment provides a purchasing power measure specific to whatever group of assets the price index coverage represents, but general with respect to any single asset. The standard deviation of the weighted price relatives making up the index can serve to summarize the gross error in the absolute sum of adjustments to individual asset valuations of an asset group. The individual asset valuation adjustment provides an estimate of the price change specific to the individual asset, but in common practice is based upon the adjusting price index. The probabilistic estimation of specific price indexes by the firm provides advantages of statistical criteria for asset valuation adjustments not available from existing published price indexes.

The article discusses input-output analysis for cost accounting, planning and control. The term "interacting departments" is used here to describe departments, which both make and receive allocations of costs to and from other departments. An example would be a service department which supports several operating departments and which in turn receives support from other service departments. The purpose of this article is to present some more powerful extensions of simultaneous linear equation systems and linear algebra to handle the interactive cost allocation problems. Input-output analysis summarizes transactions between all possible economic units involved, in a square matrix. It is required that each activity produces a single, standardized output. Fixed input-output coefficients, is not permissible for the proportions among inputs used in a process to be varied. A linear homogenous production function requires the relations between inputs and outputs not only to be linear, which is homogenous. In the model, each column of the technological matrix represents a process in the firm's production function.

The purpose of this article is to present an example of a discussion concerning the accounting model in terms of a computer environment. The instructor of accounting or data processing gets an opportunity to introduce, review or reinforce the student's understanding and use of the accounting model by way of using the model as a means of exploring the computer processing of one and two-dimensional arrays and the use of subroutine subprograms if a course in computers and electronic data processing is included in the business curriculum. This opportunity is especially significant in view of the fact that the curriculum in the college of business is often viewed by the student as a series of unrelated and isolated topics. Certainly, the realities of the situation would suggest that computers and accounting should be discussed simultaneously and not as two separate and distinct subject matters. Students who have already studied the accounting model might benefit from the review that the discussion provides through an alternative means of viewing the debit and credit structure.

The article discusses the implications of measurement theory on accounting concept formulation. Measurement is a term of common usage in contemporary accounting literature. However, inclusion of the word in accounting terminology appears to have preceded any thoroughgoing analysis of measurement's essential meaning and corresponding implications to the discipline. The purpose of this article is to analyze some deficiencies in accounting thought inferred by the perception of accounting as an explanatory discipline that utilizes measurement as its primary mode of description. As a corollary objective, these problems will be related to some objectives for future accounting research. Correspondent with this objective is the responsibility of accountants, in both research and practice, for the explanatory significance of the numbers and statements issuing from accounting procedures. Accounting research literature is replete with alternative formulations of specific accounting concepts or percepts. On the other hand, analytical research at the metatheoretical level of definitional problems in accounting is virtually non-existent.

The article reports on the basis of accounting theory. In 1966, after two years work, a committee of the American Accounting Association issued "A Statement of Basic Accounting Theory." Undoubtedly, the most startling recommendations were the sanctioning of current costs and the advocacy of two column (historical and current) reports. To this member of the committee, however, even more startling was that the near unanimous agreement on the recommendations was arrived at by following two very divergent paths originating from two very dissimilar basic concepts about accounting. The "Value" school within the committee, or as they would probably prefer to be termed the "User need" school, assumed that users' needs are known and sufficiently well specified so that accounting theory can deductively arrive at and produce optimal input values for used and useful decision models. Most of the value theorists visualize accounting's purpose as producing optimum income and capital value or values. Proponents of the "Events" theory suggest that the purpose of accounting is to provide information about relevant economic events that might be useful in a variety of possible decision models. They see the function of accounting at one level removed in the decision-making process.

This article focuses on a new tax legislation to be implemented in the U.S. regarding changes in the established depreciation methods. Until very recently, the consent of the Commissioner had to be obtained for all such changes, with the exception of a change from declining-balance to straight-line depreciation, provided the taxpayer acquired the relevant assets new. That such a switch may prove advantageous to the taxpayer under certain conditions, has been adequately demonstrated in the literature. The author of this article is interested in exploring the possibility of developing an optimum switching rule for this combination of methods, particularly when the declining-balance method is based on double the straight-line rate. The declining-balance methods hold favor because of their larger initial depredation allowances. The principal objection to a straight application of the declining-balance method is that it takes an extremely long period of time to depreciate an asset to a low book value.

The Securities Exchange Act of 1934 are aptly referred to as "disdosure" statutes. This early, major New Deal legislation was enacted in the aftermath of the stock market "crash" of 1929 and in the depths of the Great Depression, as a remedy to the faults that many believed characterized the stock markets. Considering the current possibility that the SEC will require more disclosure from conglomerates and the 35 years that have elapsed since the Acts were enacted, people should examine whether or not the legislation was, in fact, justified and what its impact has been. This examination is limited to the accounting disclosure requirements of the Securities Acts. While the Acts include provisions for regulating the operation of stock exchanges, registration of brokers, etc., the required disdosure of financial accounting information by corporations is of primary importance. This study sought to answer several questions related to the impact of the SEC's accounting disclosure requirements. The author found that there was little evidence of fraud related to financial statements in the period prior to the enactment of the Securities Acts. Nor was there a widespread lack of disclosure. A considerable number of corporations traded on the New York Stock Exchange disclosed at least sales, gross profit, and depredation and almost all reported net income and detailed balance sheets with current assets and current liabilities given. Investors who wanted accounting data had many investment opportunities available. Hence, the author conclude that there was little justification for the accounting disclosure required by the Acts.