Knowledge that Transforms

Reviews the book "Advanced Accounting," by Ronald Copeland, D. Larry Crumbley and Joseph F. Wojdak.

Reviews the book "Introduction to Accounting: Economic Measurement for Decisions," by William J. Bruns.

This article focuses on the effects of Accounting Principles Board Opinion (APB) No. 15 on earnings per share. To date the few research studies con ducted on the effects of APB No. 15 are entirely concerned with an analysis of the validity of the two-thirds rule, a cutoff point established by the Board to deter- mine the number of common stock equivalents of convertible debt which are to be used in the calculation of primary earnings per share. The Opinion concluded that a convertible security should be considered a common stock equivalent at the time of issuance if, based on market price, it has a cash yield of less than 664 percent of then current bank prime interest rate. The time issuance is then defined as the date when agreement as to terms has been reached and announced. In addition to the firm's capital structure, information about all possible relationships between the prime rate and the cash yields on the three types of bonds is input in matrix forth. For our purpose this matrix is predetermined by three rows corresponding to straight debt, convertible debt and debt with warrants and eight columns corresponding to eight possible economic conditions which are described later.

The purpose of this article is to present a framework that should be useful in making evaluative and prescriptive statements about accounting, developing testable hypotheses, and interpreting the results of hypothesis tests. The dichotomization of accounting into "external" and "internal" accounting may be distasteful to some. It seems that the dichotomy is unnecessary in developing a general perspective of accounting. The efficient markets model implies that market prices adjust "instantaneously" and unbiasedly to new information. Hence another method of testing the model involves examining market reactions to new information that is publicly available, such as earnings announcements, stock-split announcements, and dividend announcements. The theory and evidence regarding the efficient markets model have some important implications with respect to the context within which the accounting process functions. In particular, it appears that the accounting process does not possess strict "monopoly power" over the supply of information pertinent to the valuation of a firm. Instead, it appears that the accounting process functions within a competitive context. Some implications of these propositions will be considered shortly.

Reviews the book "Security Analysis and Portfolio Management: An Analytical Approach to Investments," by Steven E. Bolten.

This article presents information on the validity of the 1966 tax model and its effectiveness as a research tool. The Internal Revenue Service expects that the 1966 Model will aid researchers in measuring the impact of proposed changes code. The description manual accompanying the model states that, the Individual Tax Model is primarily a research tool that will accurately test hypotheses regarding income, deductions, tax base, tax rates, or any combination of these factors. This paper reports on a validity check on the data underlying the tax model. Specifically, they were concerned with concurrent validity, that is, investigation of the relationship of one set of data to an alternate accepted contemporary measure of the same underlying phenomenon. Tax researchers often desire data on the average dollar amount of an informational item categorized by Adjusted Gross In come (AGI) class. For example, researchers may be interested in the average amount of salaries and wages, dividends, property taxes and so forth, for categories of taxpayers broken down by AgI classes.

The article discusses discriminant analysis as applied to the resource allocation decision. Oftentimes the various departments within an organization must compete for investment funds. These resources may be allocated by the strategic planner given his perception. The normative discriminant system suggested is sufficiently flexible to be used as a descriptive system if the headquarters feel they would not alter the investment funding decisions given an expost analysis of the prior investment proposals. In this case, the priority coefficients would reflect the funding rationale as it has been applied to the previous investments. This paper shall be addressed to an examination of this question. In order to establish an organization frame of reference, an organizational model will be suggested. It is within this organizational context that the derivation and utilization of the priority coefficients shall be presented. The organizational model, which shall be adopted is that of a decentralized profit seeking entity, although the foregoing analysis applies to any organizational situation where investment funding decisions are centralized relative to the decentralized segments which initiate investment proposals.

Reviews the book "Divestment for Profit," Frederick A. Lovejoy.

This article presents information on new student rights and academic freedom in the U.S. Two examples of the greater student participation in the academic process are found in California State College at Los Angeles. The first was established by action of the college's academic senate whereby students were accorded the right to evaluate their professors' classroom performance. Evaluations are to be made in writing at least once per academic quarter. Some faculty members have of course used student evaluation sheets for many years for their own information and self evaluation. The evaluations at California State College, however, are not solely for use by the individual professor but are forwarded by student representatives directly to the chairmen of the departments and then to the department Faculty Affairs Committees. There is no denying that classroom performance of most professors, including accounting professors, can always be improved. Some professors may be stimulated to improve the quality of their teaching by the two examples discussed above. The answer to this question depends on the individual professor's view of and reactions to possible unfavorable personnel actions that might arise through either unfavorable student evaluations or unfavorable Grievance Committee actions.

Reviews the book "Frontiers of Financial Management," by William J. Serraino, Surendra S. Singhvi and Robert M. Soldofsky.