Knowledge that Transforms

Estate accounting, Financial reporting audiences, Equity reporting

It is a pleasure to participate in a small way in the effort you are putting forth-towards gaining a greater understanding of the accounting process-all of which will contribute importantly to the development of sound accounting principles. Too many discussions of accounting principles and too many decisions about accounting principles have been made in a vacuum or on the grounds of expediency. They have been made without the benefit of empirical evidence-evidence systematically researched, evidence rigorously interpreted. I know that you would agree with me that we should have no illusions concerning the speed with which measurable progress in accounting principles can be made. But it is nonetheless encouraging to see that beginnings are being made in empirical research in accounting, witnessed by the discussions that are being held here at the University. I am convinced that, in the long run, only by this kind of effort can continued progress in developing accounting principles be accomplished. Although I have had only a brief chance to review some of the papers you are discussing, I have seen enough to want sincerely to encourage you to continue these fine efforts. For the past few years I have been concerned, as some of you have surely been, over the questions and criticisms about accounting principles appearing in the press; about the doubts which such comments must arouse among people outside our profession; and about the possibly divisive influences which could develop within the profession over the issues which seem to be of concern. There is no need to go over again what is familiar ground to all of you. Let me just recall to your minds such a statement as that made by the

The research reported herein was undertaken to investigate relationships between (a) security evaluation and portfolio selection and (b) alternative inventory valuation and depreciation methods in financial reporting. First, a computer simulation model of a manufacturing firm was developed. In this simulation phase, the effects of alternative methods of financial statements and related measures (earnings per share, working capital, earnings margin, current ratio, inventory turnover, and other financial ratios along with corresponding rates of change and moving averages) were investigated under a wide range of operating conditions. In the second phase, an attempt was made to measure the effects of these accounting variations on evaluations by professional security analysts. Complete prospectuses were developed for two hypothetical companies named ETX Electronic Industries, Inc. and Rayco Electronics Corporation. Financial data for the companies were generated by the computer model. Four sets of financial reports with their related measures were generated for each company for a ten-year span. Two inventory methods (lifo and fifo) and two depreciation methods (straight-line and accelerated) were used. The four different financial reports for each company resulted m sixteen combinations of financial reports for the two companies. Participants in the study received an information packet which included an introductory letter, a return questionnaire, and one prospectus for each of the companies to be evaluated. The only variation in the in-

Auditor training, England, Wales

David Green, Jr., Joel Segall, The Predictive Power of First-Quarter Earnings Reports: A Replication, Journal of Accounting Research, Vol. 4, Empirical Research in Accounting: Selected Studies 1966 (1966), pp. 21-36

Accounts receivables

Accounts receivables

Institutional differences in accounting, Inventories, PPE

Conference summary