The article presents the author's response to comments on his paper "Coalition Formation in the APB and FASB: Some Evidence on the Size Principle," by accounting expert James A. Anderson. These comments given by Anderson are partitioned into two major areas and the article provide a few general arguments in defense of the size principle and the particular investigation. In particular, topics including assumptions of the model and methodological issues on observation of coalitions, specifying payoffs and operationalizing tendency seem to capture the major points. The article also provides some remarks regarding the simplistic nature of the size principle versus more developed models of coalition formation based on policy dimensions. Anderson raises a number of points regarding the conditions required to test the predictions of the size principle and the information and threat effects. Some concerns are over the surrogates utilized in the tests. These comments focus on the inability to observe a winning coalition, the nature of a "tendency" toward minimum winning coalitions and the payoffs to participants in the standard-setting process.

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.

This paper examines and clarifies the applicability of APB Opinion No. 29 to (1) "trade-in" transactions that involve a dealer, and (2) exchange transactions that involve a "significant" amount of monetary consideration (boot). Principal findings are: The APB intended that the exception to the general accounting rule (as reflected in paragraphs 21 and 22 of the Opinion) apply to exchanges of similar nonmonetary assets only in instances where both parties to the transaction are either (a) dealers or (b) non-dealers. If an exchange involving similar nonmonetary assets results in the culmination of an earnings process for either party, the general rule applies to both parties. In addition, the Board's intent was that the exception to the general rule should apply to exchanges of similar nonmonetary assets irrespective of the amount of monetary consideration involved in the transaction.