Knowledge that Transforms

Reviews the book "Financial Accounting," 4th ed., by Walter B. Meigs and Robert F. Meigs.

A new method of statistical analysis for DUS is presented in this paper. This method is based on a three-moment representation of the sampling distribution for the mean error. The performance of the resulting upper confidence bound is examined in 236 separate simulation studies covering the error rates and tainting patterns observed in actual accounts receivable and inventory accounts. The bound is easily calculated and reliable. It would result in the correct acceptance of more accounts receivable populations than the multinomial bound when the materiality limit is less than four percent. It does a significantly better job of dealing with inventory populations with both overstatement and understatement errors than the currently available methods.

Reviews the book "The Financial Reporting of Contingencies and Uncertainties: Theory and Practice," by Daniel B. Thornton.

This article describes the nature and effects of the miscalculation of both the current and noncurrent portions of long-term lease obligations which results from the use of the "change in present value" approach.

This research investigates the effects of delays by accounting policy-setters in reconciling the accounting treatment of stock options and stock appreciation rights (SARs). Comment letters to the FASB concerning Interpretation No. 28, observed SAR adoption practices, direct survey results from companies not adopting SARs, stock prices' reaction to the related accounting policy process, and the structure of SAR plans are analyzed. Analysis of the content of lobbyists' letters, descriptive statistics, t-tests, correlation coefficients, and an event study of related AICPA and FASB announcements are utilized. The evidence supports the hypotheses that the accounting treatment of SARs has deterred companies with stock option plans from adopting SARs, has deterred smaller companies from adopting SARs to a greater extent than it has deterred larger companies, has had a discernible "bad news" effect on the market, and has affected the form of those SAR plans which have been adopted. The recent advent of so-called "stock depreciation rights" may well lead to the elimination of SARs, largely due to the accounting treatment of SARs.

Leaders in the accounting profession have cited the need for accountants to be able to function professionally in a complex and changing environment. The literature of cognitive development suggests that such individuals must possess a high level of cognitive complexity, and the literature on personality types shows that people self-select into professions partially as a result of their perceptions of the professional stereotype. Since the introductory and intermediate accounting courses may profoundly influence students' perceptions and their career choice, the courses should be designed so as to attract those more cognitively complex individuals whom the profession needs. This study analyzes the relative performance of introductory accounting students with high and low levels of cognitive complexity on structured versus unstructured course materials. Students at all levels of cognitive complexity performed equally well on highly structured accounting examination questions, but students with high levels of cognitive complexity performed significantly better on unstructured case materials. The implication of the results is that if accounting educators wish to attract students who can function in a complex and changing environment, the introductory accounting course should include unstructured course materials.

A worksheet for demonstrating the articulation of financial statements is presented. The proposed worksheet can be useful in showing students the interrelationship of beginning and ending balance sheets and the income and cash flow statements.

Reviews the book "Management Accounting Research and Practice," edited by David Cooper, Robert Scapens and John Arnold.

Reviews the book "Accounting Education in Economic Development Management," by Adolf J.H. Enthoven.

Reviews the book "Income Tax Fundamentals," by Gerald E. Whittenburg and Ray Whittington.