Firms which elect to use accelerated depreciation for tax purposes while using straight-line for reporting purposes have only one approved method for recording the difference between book tax expense and the tax liability.' This method relies on a deferred credit account in which the difference between the tax expense (calculated using straight-line depreciation) and the actual tax paid is recorded. The reported net income resulting from this procedure is the same as it would have been if straight-line depreciation were taken for tax purposes. Tax allocation is considered an extension of accrual accounting to include` taxes. The logical grounds for such inclusion are laid in the classification of taxes as expense items.

In recent years there has been a growing interest in the application of behavioral science procedures to managerial accounting procedures. However, it is becoming increasingly apparent that the usefulness of the managerial accounting procedures in planning and controlling business operations depends to a great extent upon effective human relations. There have, been several studies emphasizing the psychological effect of various phases of budgeting which provide background for the research reported in this paper.' Since the control phase of managerial accounting necessarily points out individual efficiency and inefficiency, the psychological impact on the individual is profound. Becker and Green stated that feedback of performance results is essential for good morale; it is imperative for each participant to know whether he should feel success or failure. Communicating knowledge of results acts, in this case, as reward or punishment. It can serve either to reinforce or extinguish previous employee behaviors. 2 The empirical research reported in this paper is the first part of a two-phase study of the psychological effect of performance reports. This experiment was designed primarily to test the psychological impact of frequency of feedback. Three groups of students participated

Auditor training, England, Wales

On the occasion of a corporate merger or combination, the most important issue which arises is the restatement of assets from historical costs to current values. Whether to make such an adjustment is the primary decision to be made before any other major question is considered.' Thus far, the usual approach to this problem has been to base the decision upon whether the combination qualifies as a or a of interests. The first expression refers to situations in which assets of certain parties to the transaction are deemed, in effect, to have been purchased by the surviving entity or interests, with the implied conclusion that they should be restated to current market figures. In the second case, assets are conceived as being merged, without any inference of a transfer or thereof. The implication in this latter case is, of course, that the merged assets should retain the bases of accountability previously adopted by the constituent firms, and this normally means unamortized historical costs. Thus, the attention of accountants has been given primarily to the development of rational criteria for distinguishing between the purchase and the pooling situation, as those two terms have been defined. The continuity of individual stock ownership, management, business objectives, and the business enterprise have all been postulated as appropriate guidelines, together with such other considerations as the relative sizes

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

Accounting history, Public accounting

Capital Budgeting, Resource allocation, Opportunity costs, Programming

Tax incentives, Economic Stimulus, Accelerated depreciation