Knowledge that Transforms

There are currently no definitive guidelines for reporting the current and noncurrent portions of lease obligations. Two possible approaches to this problem of allocation-the change in present value approach and the present value of the next year's payments approach--have been identified by Swieringa [1984]. This article addresses two aspects of this financial reporting issue. First, evidence is presented to show that the change in present value approach appears to be dominant in current financial reporting practice. Second, it is shown that adjustment of the reported financial statement numbers to those that would be obtained by the present value of the next year's payments approach does not affect the ranking of companies by a number of financial measures. These results suggest that the issuing of guidelines for reporting the current and noncurrent portions of lease obligations by the FASB is not warranted.

The audit risk model was used to generate hypotheses concerning the effect that internal control evaluation exerts on audit planning decisions. Specifically, directional predictions concerning the contingent nature of the effects of the susceptibility of accounting processes to error, the strength of the internal control design, and the strength of the related compliance tests were developed. These hypotheses were then compared to the behavior exhibited by a group of experienced auditors who completed a highly realistic series of case studies. The auditors' decisions were consistent with the predictions developed from the audit risk model. In addition, the paper introduces a modification of the standard policy-capturing method that allows the use of complex realistic case materials in a powerful, internally valid experimental design which decreases problems with experimental demand. It also provides initial evidence on experts' perceptions of the effectiveness of different approaches to compliance testing and further evidence on auditor consensus in a more structured audit environment.

The primary purpose of the study is to provide evidence on the characteristics of firms which did and did not disclose management's annual earnings forecasts in the Well Street Journal. The study finds that earnings variability is greater for non-disclosing firms while firm size is larger for disclosing firms. Systematic market risk was not significantly different between the two groups of firms. To the extent that earnings variability and firm size influence forecast accuracy and information content, the results reported in this study suggest that the accuracy and information content of voluntarily disclosed forecasts may not be representative of the accuracy and information content of the forecasts of currently nondisclosing firms if forecasts for these firms become required.

Reviews the book "Information Systems: Theory and Practice," by John G. Burch, Felix R. Strater and Gary Grudnitski.

Reviews the book "Congress Proceedings: Sixth Annual Congress, 6-8 April 1983."

Reviews the book "The British Accounting Review: Research Register 1984," by R.W. Perks.

Baran, Lakonishok, and Ofer [1980] present some empirical evidence on the information content of general price-level adjusted (GPL) earnings relative to historical cost (HC) earnings. Their statistical tests are shown to be invalid, thus leaving unsupported their main conclusion-GPL earnings are superior. We apply an appropriate statistical test to their data and find contrasting results: GPL betas exhibit significantly better correlation with market betas than do HC betas for market value-denominated betas, but not for a non-market-denominated β. No conclusion can be rendered on the information content of GPL earnings, and the controversy over accounting β construction is rejoined.

Reviews the book "Creative and Innovative Management: Essays in Honor of George Kozmetsky," edited by A. Charnes and W.W. Cooper.

Reviews the book "Management Control Systems," by Robert N. Anthony, John Dearden, and Norton M. Bedford.

Reviews the book "Socio-Economic Accounting," by Ahmed Belkaoui.