Knowledge that Transforms

Reviews the book "Federal Income Taxation of Corporations and Shareholders," by Boris Bittker and James Eustice.

This article presents news related to various university professors in the U.S. On a recent trip to Korea, Paul Garner was awarded an honorary doctorate by the University of Pusan. A.J. Penz has been reappointed to the editorial board of the Institute of Internal Auditors. Kemper W. Merriam has returned from a year's leave after serving as a UN consultant in the Middle East and being a visiting professor at the University of Hawaii. John H. Myers is presently serving on the Accounting Practices and Principles Committee of the Illinois Society of CPAs. Joseph M. Golemme, chairman of the accounting department assumed the position of director of the Graduate School of Professional Accounting last September 2005. Gordon B. Davis has been promoted to the rank of professor at the University of Minnesota. He is serving as a computer consultant for the AICPA this year. Thomas F. Keller, sabbatical leave, is spending the year on a research project at Carnegie Institute of Technology. Paul Lindloff is visiting professor during the current year, William M. Keane has resigned to accept a position at the University of Notre Dame.

Reviews the book "Accounting and Reporting Requirements of the Private Pension Trust," by Joe J. Cramer Jr.

Reviews the book "Managerial Economics and Operations Research," edited by Edwin Mansfield.

Professional accountants, both private and public, would undoubtedly be better off with a more explicit and rigorous definition of materiality. This would allow a greater degree of agreement between accountants on questions of materiality and, hence, more uniformity in statement presentation. An explicit definition of materiality would permit the accountant to decide quickly, and expediently, questions of materiality, and thereby allow him more time to devote to other issues. In addition, and perhaps even more important, there are psychological benefits to be derived. is in a much happier situation vis-a-vis the informed public when he has well defined concepts on which to base his judgment. Besides a percentage rule of thumb, materiality must be considered in relation to the economic environment surrounding the business enterprise. This consideration supplements the percentage rule of thumb and thereby adds another explicit dimension that the professional accountant can use when resolving questions of materiality.

The article focuses on fundamental changes in accounting system courses in colleges and universities of the U.S. Fundamental change is often characterized by independent efforts to find common solutions to problems, to devise the best method of attacking problems. These courses vary from those, which are quite similar to the traditional systems course to those, which have as a major tenet the assumption that the information system includes but is not limited to present-day accounting. A characteristic common to some is an emphasis upon the interrelationship between information and decision-making or control. Information and control systems are a requisite of survival for organizations of all kinds. In the business organization, the information and control system should be an integrated set of information networks, policies, procedures, decision functions, and control mechanisms. Management information and control systems should be integrations and syntheses of accounting and other organizational information systems.

This article focuses on a study which demonstrated how similar types of standard cost variance analysis may be applied to the control of the application and performance of formal decision models. Previous efforts to improve the usefulness of standard cost variance analysis have tended to focus on one of two related problems. Proposals have been offered that had as their objective either an improvement in the types of variances the accountant should calculate or in his methods for analyzing the significance of observed variances. The essential difference between process control and model control lies in the type of response management should make to an observed variance. The appropriate response by management depends upon the expected source of the deviation. Traditionally, standard cost systems have concentrated on the analysis of type 1 and type 2-a deviations. These systems have not been designed to indicate when and if type 2-b deviations are critical to the decision process.

Reviews the book "Cost Accounting for Management Applications," by David H. Li.

This article focuses on the conventional methods of calculating depreciation often involve the arbitrary allocation of the historical cost of a fixed asset. The use of discounted cash-flow techniques has been advocated by a number of authors as the ideal basis for allocating the cost of an asset over its useful life. In the latter method, depreciation is regarded as the periodic reduction in the value of a fixed asset arising from a change in the asset's expected future benefits. Briefly, this method requires that the estimated future net services of the asset, including the scrap value, be discounted to their present value at the end of each accounting period. The future net services of an asset are the cash inflows of the business attributable to the use of that asset alone, that is, not attributable to other outlays, for example, for labor, materials, and maintenance or repair. This article examines the implications of changes in expectations for depreciation, first, when the discount rate is the internal rate and, second, when it is an external rate such as the cost of capital.

This article focuses on the prospective adventures in Accounting ideas. Almost the whole of the development of accounting ideas as they are today relevant has occurred within the lifetime of the Association and in that development members of the Association have played a prominent and honored part. Without belittling the record or the massive endeavors of many, one cannot here name, we can usefully look at a few ideas, a few cases in which men have thought greatly of accounting. These fifty years have seen quite a few potentially fruitful ideas, with wide implications, brought to notice, noticed scarcely at all and almost abandoned. This was an adventurous exercise, novel in the literature. At the same time he roundly criticized some of them. This too was rather bold. But though the intervening years have provided outstanding illustrations of the inadequacy of these assumptions, substantially the same assumptions underlie today's accounting. According to the author, accounting could become a real language of business finance instead of a mass of only vaguely understood and only vaguely understandable symbols.