Knowledge that Transforms

Abstract The article presents the author's comments on financial paper "Coalition Formation in the APB and FASB: Some Evidence on the Size Principle," by professor D. Paul Newman. The author believes that there are two major levels of Newman that need to be examined critically. First, there are major problems with the size principle that have long been discussed by political scientists. Second, and probably more significantly, it does not tell one very much about the political nature of the accounting standard-setting process, despite Newman's interest in "politics" as the motivating force of the paper. This latter result is caused partly by problems with the size principle and partly by problems specific to Newman's paper. The discussion in the article focuses on several examples of major difficulties of Newman, problems in the assumptions and testability of the theory, in specification and observation of the payoffs, and problems specific to the tests of alternative explanation that Newman has presented.

Abstract Reviews the book "Financial Accounting," by Roger H. Hermanson, James Don Edwards and Ray H. Garrison.

Abstract Reviews the book "The Institutional Investor and Financial Information," by T.A. Lee and D.P. Tweedie.

Abstract Reviews the book "Company Legislation and Changing Patterns of Disclosure in British Company Accounts, 1900-1940," by J.R. Edwards.

Abstract Reviews the book "Contemporary Managerial Accounting: A Casebook," by John Shank.

Abstract ABSTRACT: Financial report ratio analysis is frequently taught in introductory financial accounting courses. Beginning students often have unrealistically high expectations concerning the usefulness of such ratio analysis. After learning the basics of the Efficient Markets Hypothesis, many students over-react and dismiss ratio analysis as useless. This paper provides a more balanced appraisal of ratio analysis by discussing three areas in which ratio analysis may be useful: (1) analysis of business transactions in markets that may not be efficient, (2) contractual limits based on accounting ratios, and (3) performance prediction and risk evaluation in an efficient market. By discussing these potential contributions of ratio analysis in class, the instructor can help students place ratio analysis in proper perspective and can also help integrate the accounting/finance curriculum.

Abstract Reviews the book "Investors' Use of Financial Accounting Statement Numbers: A Review of Evidence from Stock Market Research," by George J. Benston.

Abstract Reviews the book "Corporate Controller's Handbook," edited by Paul J. Wendell.

Abstract ABSTRACT: Although "compressed-course" offerings are widely found in summer programs and intersessions, little published work has evaluated the efficacy of this format relative to conventional term courses, apparently because the controls necessary for strict comparative research are difficult to implement. This study involved such a comparison between several sections of two accounting courses offered under the most compressed format possible and under a regular semester. All aspects of the courses were virtually identical. Evaluation was in terms of (a) terminal performance, (b) post-course student reactions, and (c) comparison of reactions with prior expectations. Analysis of the data showed the compressed format to be highly comparable to the regular format on both performance and student evaluation profiles. The only differences, both marginal, were in the tendency for perceived stress and instructor effectiveness to be greater under the compressed format. Given the rigor of the experimental controls and the power of the statistical tests used, these findings constitute strong evidence of the efficacy of compressed courses.

Abstract Reviews the book "A Practical Approach to the Appraisal of Capital Expenditures," 2nd ed., by C. Geoffrey Edge and V. Bruce Irvine.