Abstract Reviews the book "Transfer Pricing and Multinational Corporations: An Overview of Concepts, Mechanisms and Regulations," by Sylvain R.F. Plasschaert.
Abstract ABSTRACT: FASB Statement No. 52 on Foreign Currency Translation is designed to achieve compatibility between financial statement numbers and underlying economic effects of exchange rate changes. This result is accomplished through the selection of what the FASB terms the functional currency of the foreign subsidiary. Unfortunately, the rationale underlying the functional currency choice is complicated and not widely understood. To overcome the problem, this paper explains the objectives behind the functional currency choice by using three illustrative case settings.
Abstract ABSTRACT: This study tests the reaction of security returns to anticipated and unanticipated inflation using SFAS 33 data to stratify firms cross-sectionally by inflation sensitivity. The cross-sectional stratification allows for the distributive effects of inflation and provides a unique means of assaying the accounting disclosures. The results confirm the significant negative impact of unanticipated inflation on security returns for the 1980-82 period. The market measure of inflation sensitivity, however, does not appear to be related in any way to accounting measures of inflation sensitivity based on SFAS 33 data.
Abstract The article presents information on the Quasi-Bayesian audit risk model for dollar unit sampling. The auditor's objective is to limit, to a reasonably low level, the risk that a material error will remain undetected in financial statements that he has examined. DH&S has a formalized approach to combining subjective and objective probabilities that, we believe, accomplishes that objective. A personal correspondence to the chairman of the statistical sampling, J.H. McCray is proposing a different approach to combining these probabilities, which also may accomplish the auditor's objective. However, McCray's article provides no basis for his assertion of serious deficiencies in the DH&S method of combining subjective and objective probabilities. Furthermore, it offers no evidence to demonstrate that the described McCray method is better than any other approach to assessing or combining probabilities. The value of audit risk modeling is recognized and have been an innovator and a primary user of such techniques since the early 1960's. Its believed that the model is among the most advanced currently used by auditing practitioners and we welcome academic research that may provide enhancements.