The article reviews the book "Federal Income Tax Fundamentals," second edition, by William E. Dickerson and Leo D. Stone.

Education is presently set in an environment that is curiously paradoxical in nature. Curricula which give appropriate emphasis to the multivariate character of business problems should not be circumscribed unduly, yet, an overexposure to the myriad of complex influences which compound the difficulty of problem solution may well create for the average student a greater measure of confusion than resolution. Educators have long recognized this phenomenon and have increasingly sought to provide the student with an atmosphere of business and to develop in him an appreciation of the relevance of his field of special interest. This belief in the importance of relating the various business stimuli and the collateral disciplines in a climate which focuses attention on the practical problems of decision-making has resulted in a number of significant educational innovations. In general, they are all essentially variants of two basic concepts namely interim work experience programs and scale simulation, in the classroom, of the interaction of the various business influences.

The article informs that much of the accounting data used in management control and administrative decision making is a product of antecedent processes of cost allocation and expense distribution. Both of these operations assume the validity of cost divisibility and recombination. Existing practices of accountants in allocating costs and expenses to relevant production orders, products, processes and/or departments would appear to confirm the general acceptability of such an assumption. Effective cost control depends upon an identification of costs with responsibility centers, and the calculation of unit costs is especially important in measuring product or process profitability. In the analysis of costs, an important first problem which confronts the accountant is the measurement of benefits to be derived from the cost or expense elements which are not dearly identifiable with specific departments or cost centers. The reliability of successive allocations necessarily rests upon this first, basic determination. Once the interdepartmental relationships, or associations, are established quantitatively, there remains a second problem of arithmetically distributing costs in the previously established allocation ratios.

This article presents a comparative analysis of accounting and mathematics. From a formal point of view, there is a complexity similarity in the methods of mathematical and accounting analyses. Both reason sequentially from basic propositions to "useful" conclusions, sufficient conditions are hypothesized, and necessary conclusions are hopefully derived. This natural orientation toward the deductive method should eventually provide a basis for an axiomatic systematization of extant accounting knowledge, perhaps in a fashion analogous to Euclid's classical formulation of geometry. It is suggested that the fundamental similarity between the reasoning processes of mathematics and accounting exposes an appropriate source of useful refinements in the accounting methodology. In particular, consideration of these characteristics of the methodology of mathematics points the way for strengthening the logical consistency of present accounting analyses; further, research directed toward this goal may in time produce completely new "systems" of accounting. The values of mathematics are only partially appreciated and hesitantly accepted by accountants. Other disciplines have experienced even greater difficulty penetrating the shell of accounting conservatism. The hope is here expressed that accountants will explore more fully those fields of basic knowledge having some observed relationships no matter how tenuous-to accounting to the end that their mutual interests and attributes may propose more fundamental common characteristics.

Those who would divine the future dimension of the accountancy profession must inevitably measure the significance of many economic, social, and political influences which condition the posture of the U.S. business. Educators and businessmen alike are concerned about the educational framework for future careers in business. In consequence, they have been compelled to reexamine their respective contributions to this period of professional preparation, to the end that their efforts may be more mutually reinforcing. One of the most important phenomena relating to business education since World War II has been the growing interest demonstrated in post-graduate training. The vehicles most often employed for executive review or development are specially conceived and prepared management training programs. The success of these programs has been attributed, at least in part, to their emphasis on the integration of various business disciplines which influence managements deliberations. A survey including all major subject-areas showed that accounting and other quantitative methods are represented to the extent of approximately 20 percent, ranging from a low point of inclusion of 15 percent to a peak of 50 per cent.

In this article, the author discusses the theory and practice of accounting. He differentiated between beliefs and theories, defines propositions and highlights that a theory of accounting includes a collection of propositions or assertions. He emphasizes that recorded experience is not part of a theory of accounting but is one of the sources which give rise to propositions. He explains the two aspects to the study of accounting, namely, the pure aspect and the applied aspect and their provinces. He stresses on the importance of the separation of entities for the purpose of accounting and the inclusion of propositions in a theory of accounting while ignoring the practical procedure. He illustrates different propositions in a theory of accounting which include records, ascertaining profit and determination of depreciation. The net effect of the entity's transactions and the position of the entity have been described as results obtained from the application of propositions to entities and the requirement by law to obtain certain results from certain accounting entities have been enumerated. The author describes accounting as a theory and as a practice.

This study examines the role of the external audit in management's decision about the amount of GAAP financial statement information to disclose in the annual earnings announcement. The earnings announcement is a key disclosure provided by public companies. Yet, there is no requirement that earnings announcements contain audited GAAP numbers; in fact, recent trends indicate that a majority of companies release earnings before the completion of year-end audit fieldwork. I predict and find that companies that wait until the audit is more complete at the earnings announcement date and receive higher quality audits provide more detailed balance sheet, cash flow statement, and overall GAAP disclosures. I also provide evidence that complete audits and higher quality audits impact the information content of the earnings announcement. The combined results indicate that audit completeness and quality help facilitate more detailed earnings announcement disclosures and have implications for the equity market. Data Availability: Data are publicly available from sources identified in the text.

[This paper analyzes seven mandated disclosures contained in Management Discussion and Analysis (MD&A) to assess their information content. Generally, the results show that certain MD&A disclosures, particularly the discussions of future operations and planned capital expenditures, are associated with future (short-term) performance measures and investment decisions, after controlling for information contained in financial-statement-based ratios. However, the associations with longer-term results are generally not significant. The study illustrates that, in conjunction with the financial statements, the MD&A disclosures, especially prospective disclosures, can assist in assessing firms' future (short-term) prospects.]

This paper analyzes seven mandated disclosures contained in Management Discussion and Analysis (MD&A) to assess their information content. Generally, the results show that certain MD&A disclosures, particularly the discussions of future operations and planned capital expenditures, are associated with future (short-term) performance measures and investment decisions, after control- ling for information contained in financial-statement-based ratios. However, the associations with longer-term results are generally not significant. The study illustrates that, in conjunction with the financial statements, the MD&A disclosures, especially prospective disclosures, can assist in assessing firms' future (short-term) prospects.

[This study adds to recent research that assesses the value implications of earnings changes. Stock price changes associated with reported earnings innovations (typically assessed by estimating earnings response coefficients) have been characterized as related to the persistence of earnings, which is defined as the revision in expected future earnings that is implied by a current earnings innovation. Permanent earnings innovations are associated with higher multipliers than transitory ones. This stream of research stems from Kormendi and Lipe (1987) and Easton and Zmijewski (1989). These studies characterize earnings persistence as a stationary, firm-specific phenomenon that describes the evolution of earnings over time. They estimate parameters of earnings persistence from time-series data on earnings and then show that the market's pricing of earnings innovations are related to the persistence measures. Typically, this evaluation involves ex post information, so the approach is not relevant for investors' ex ante determination of pricing multipliers. This article reports three findings on the pricing of annual earnings changes. First, pricing multipliers can be evaluated contemporaneously by other information published in annual financial statements along with earnings. An investor who seeks to assess persistence and the price effect of a reported earnings change can do so by referring to other information in the financial statements. Second, in contrast to previous research, this study shows that the earnings persistence indicated by financial statements is not a fixed attribute, but changes over time and tends to revert to the mean of all firms. Correspondingly, pricing multipliers follow a similar pattern, which requires their periodic updating through financial statement analysis. Third, the multiplier of earnings changes is also related to information published in the previous year's annual report. To the extent that previous accounting reports provide forecasts of earnings that are already incorporated in prices, multipliers are lower.]