Knowledge that Transforms

Reviews the book "An Introduction to Flow of Funds Accounting," by Kyojiro Someya.

The article comments on the paper "Misleading Tax Figures--A Problem for Accountants," by Richard P. Weber. The paper is based on the topic of the allowable methods of allocating a consolidated return tax liability among the various members of an affiliated group pursuant to Section 1552 of the U.S. Internal Revenue Code and Reg. &3x00A7;1.1502-33(d)(2). It presents a numerical example which illustrates the nine possible allocations of the consolidated tax liability considering these statutory provisions. The author disagrees with the paper's conclusion that when members of an affiliated group publish separate financial statements and use a different method of allocating the consolidated tax liability for financial reporting purposes than for tax purposes, the resulting tax liability as reported on the financial statements may be misleading. Apparently, the basis of Weber's conclusion is that the allocated tax liability is different from what the tax would have been if the individual company had not been a member of an affiliated group.

CPA examination performance of two groups of candidates is analyzed, providing a basis for counseling students as to factors related to success in passing the CPA examination. Of key importance is the indication that a failing candidate who continues to retake the examination is likely to experience marked variation in examination scores on successive attempts as well as some improvement. Personal factors influencing success on the examination are also analyzed.

The article focuses on the issue of communicating accounting research results. With the research into the accounting literature, it has been asked whether the findings of the research are being transmitted effectively to those who would endeavor to understand the implications of the research for the future of the discipline. It may be urged that a disservice would be done to the cause of path-breaking research if its results must be seen to be conveyed in the same widely understandable terms as might be found in the more familiar applications. Journals do not perform the same role as seminars or colloquia to which only a small circle of highly trained researchers might be invited. Authors of frontier research may communicate among themselves at such gatherings and through the circulation of working papers. Those who would seek publication in a journal are assumed to be prepared to make their research accessible to a wider audience, and it is the responsibility of a journal editor to facilitate this dissemination by encouraging authors to remove the unnecessary obstacles.

Reviews the book "European Financial Reporting 1: West Germany," by J.H. Beeny.

A popular rule of thumb asserts that an extra tax deduction will generate a tax benefit equal to the tax rate times that deduction. This paper shows that when the extra tax deduction is a preference item, this rule of thumb can be economically harmful. The decision model presented in this paper examines the implications of taking extra tax deductions of preference items in the light of the minimum-maximum tax structure set forth in the 1976 Tax Act. The corporation tax situation with respect to the preference tax structure is also considered. The impact of the preference tax deduction is analyzed under a number of constraints and illustrated with a specific set of data. The generality of the conclusions reached is then tested by quantitative techniques.

The article presents commentaries by editors of Book Reviews on accounting, published in the October 1978 issue of the journal The Accounting Review. In the book Studies in Resource Allocation edited by Kenneth J. Arrow and Leonid Hurwicz, a question considered by some accountants is the coordination of individual units within a large organization especially the large multidivisional company to achieve the central objectives of that organization. Accountant's Guide to Insurance and Risk Management by Francis D. Barrett offers a description of many insurance policies, self-insurance programs and risk management techniques. Inflation Accounting: A Guide for the Accountant and the Financial Analyst purports to cover every aspect of general price-level-adjusted accounting procedures both from the standpoints of both "how to do it" and "what it means" in twelve chapters, a selected bibliography and index. Business Law Review by Edmund F. Ficek is a new entry into those books prepared to help accountants pass the Business Law section of the CPA Examination.

ABSTRACT: The emergence of divergent terminology in the accounting literature is a recurring problem. This article provides an illustration of this problem and suggests an approach to theory presentation which can reduce some of the communication difficulties encountered by readers.

The article presents a reply to authors John F. Kottas and Hon-Shiang Lau, on the appropriate size of samples in &chi 2 tests. The paper by FHN falls into the realm of accounting risk analysis. In risk analysis, it attempt to incorporate uncertainty into the decision process and, at the same time, try to make the analysis as simple as possible so that it can be understood by the manager and so that it can be done by those with elementary knowledge in statistics and mathematics. There is, therefore, a need in risk analysis to reduce intractible functions to reasonable approximations, preferably to the normal approximation as it is the most familiar and easiest distribution for the practitioner to use. In simulation experiments, the record has been that the choice of sample size was, for the most part, arbitrary. Better yet would be a choice based on the fulfillment of some important criteria of validity, for example, that the minimum expected frequency in a cell be no less than one in a chi-square goodness-of-fit test.

ABSTRACT: The effect of focusing examination questions on students' individual weaknesses was measured. Two sections of students in an elementary accounting course were taught in the same manner. However, the examinations of one section of students were modified. On the second through sixth examinations each student received a sampling of items that he or she had answered incorrectly on prior examinations in addition to those test items covering new material, The other section was tested only on the material presented subsequent to the previous examination. Both sections received a common final examination. Data analysis revealed significantly better performance on the post-test by the section of students whose examinations had included review questions focusing on their individual weaknesses.