Knowledge that Transforms

Reviews the book "Cost Accounting: Processing, Evaluating, and Using Cost Data," 2nd ed., by Wayne J. Morse.

Reviews the book "Monograph on Internal Controls in EDP Systems," by Martin B. Roberts.

Reviews the book "British Accounting Standards: The First Ten Years," edited by Ronald Leach and Edward Stamp.

This paper examines the impact on stock price residuals of fixed asset revaluations by 232 listed British companies in the period 1964-1973, primarily using a simple CAPM test. The results show a positive upward movement in the cumulative average residuals around the announcement date. To evaluate their significance, the sample of companies was partitioned into sub-groups dependent on other signals of interest, namely stock dividends and other capitalization changes, and changes in earnings and dividends. From the analysis, it appears that revaluations were associated with unexpected positive returns when taken by the capital market as a pointer to other favorable signals from a company and to increased future benefits to stockholders. Where these expectations of associated or subsequent favorable signals were not confirmed, revaluations alone did not result in significant positive residuals.

Reviews the book "The Big Eight," by Mark Stevens.

This study provides the actuarial computations necessary to delineate the "earned" portion of the Social Security retirement benefit under the current provisions from the redistributive (income transfer) element of the benefit. This is accomplished by comparing the benefits that would be payable under an annuity plan for workers of varying wage levels, family compositions and working periods with the benefits that these same workers and their spouses would have been entitled to under the current Social Security benefit structure. The results show that future retirees can expect to receive sizable transfer payments in almost all cases, but the difference in the transfer amount between single earner and dual earner families will increase. These results have important policy implications and provide a necessary assessment of proposed annuity recommendations such as are contained in AICPA Statement of Tax Policy No. 8, Suggested Improvements for the Social Security Retirement System.

Reviews the book "Management Accounting: A Decision Emphasis," 3rd ed., by Don T. DeCoster and Eldon L. Schafer.

Several studies have identified and reported various factors influencing career-choice decisions of accountants; but none has been reported that systematically relates career-choice factors of accountants with those of other professionals. To provide data for comparisons, ratings of career-choice factors were obtained from accountants, attorneys, engineers, and physicians. A multiple discriminant analysis of these data reveals distinctive differences in career-choice and motivating factors among the four professions.

The standard explanation of the LCM Rule does not stress the application of accounting concepts because the definition of loss implicit in the rule shifts as different valuation bases are selected under the rule. Cost may be compared with replacement cost, with net realizable value, or with net realizable value less normal profit. Without any singular concept of what is being measured as a loss under the rule, students are routinely presented with an inadequately explained rule. The objectives of the rule can become obscure when there is no clear understanding of what the rule is attempting to measure. This paper presents an analysis and critique of the LCM Rule through the use of a graphical approach. The critical relationship between input and output prices is illustrated and the application of a consistent loss concept is stressed.

Reviews the book "Let Accounting Help You Manage: A Managerial Accounting Primer," by John Gibbs and Robert W. McGee.