ABSTRACT: Financial reporting of lessors' transactions is a controversial area for several masons: (1) lessors' accounting alternatives (e.g., operating vs. sales-type lease methods) usually generate large financial statement differences; (2) many of the parameters required to implement lessors' accounting choices (e.g., residual value estimates) are "soft" and, therefore, difficult to verify; (3) little is known about the sensitivity of income disclosures to errors in these parameter estimates; and (4) lessors' rules are still evolving and, therefore, are somewhat ill-defined. Using a highly critical Barron's article regarding Comdisco, Inc. as a starting point, this paper analyzes aspects of these masons for controversy, especially (3) and (4). Specifically, Barron's argued that Comdisco's accounting for residual values and other leasing Income recognition procedures were flawed. Using Comdisco's financial reports as a benchmark, we analyze elements of lessors' accounting and evaluate competing reporting options. We then examine the sensitivity of income numbers to residual value estimation errors using a simulation approach. The parameters for the simulation are derived from Comdisco's recent disclosures. The simulation results and analysis are used as a basis for recommending changes in lessors' financial disclosures and income determination.

[Financial reporting of lessors' transactions is a controversial area for several reasons: (1) lessors' accounting alternatives (e.g., operating vs. sales-type lease methods) usually generate large financial statement differences; (2) many of the parameters required to implement lessors' accounting choices (e.g., residual value estimates) are "soft" and, therefore, difficult to verify; (3) little is known about the sensitivity of income disclosures to errors in these parameter estimates; and (4) lessors' rules are still evolving and, therefore, are somewhat ill-defined. Using a highly critical Barron's article regarding Comdisco, Inc. as a starting point, this paper analyzes aspects of these reasons for controversy, especially (3) and (4). Specifically, Barron's argued that Comdisco's accounting for residual values and other leasing income recognition procedures were flawed. Using Comdisco's financial reports as a benchmark, we analyze elements of lessors' accounting and evaluate competing reporting options. We then examine the sensitivity of income numbers to residual value estimation errors using a simulation approach. The parameters for the simulation are derived from Comdisco's recent disclosures. The simulation results and analysis are used as a basis for recommending changes in lessors' financial disclosures and income determination.]

Empirical inflation accounting research often requires the use of capital expenditures data in order to estimate dated layers of long-lived assets. This dated-layering then is used as a basis for computing either general or specific price-level adjustments. However, the definitions and policies employed in the reporting of capital expenditures on Compustat result in data which are not appropriate for this layering objective. It is shown that naive use of this data can lead to a systematic and potentially significant bias in estimating fixed asset ages. More detailed data, perhaps derived from SEC 10-K disclosures of asset acquisitions and retirements, may be required to circumvent this problem and to provide an improved basis for future inflation accounting research.

The purpose of this article is to explore the effect of productivity change on the divergence between historical cost income and income computed on a current replacement cost basis. Most discussions relating to changes in the established historical cost framework emphasize the impact of rapid inflation on differences between methods. However, simulation results indicate that changes in resource productivity also affect the relative magnitude of differences between methods. In other words, inflation is not the only variable that must be considered by policy makers in deciding whether to retain historical cost as the established accounting basis. The long-term significance of this to policy makers is that a potentially broad range of economic variables, productivity being one example, must be considered in analyzing accounting issues. Inflation is not the sole cause for differences among methods, and the broader economic dimensions underlying accounting policy choices must be recognized. A more immediate policy implication relates to the expected effect on productivity of emerging international cartels, natural raw materials depletion and other related supply-demand factors. Insofar as these factors tend to reduce secular productivity gains (or lead to productivity decreases), one can expect the relative differences among accounting measurement alternatives to widen.

Reviews the book "Essays on Cost," edited by J.M. Buchanan and G.F. Thirlby.

This paper examines banks’ choice of accounting methods in a new regulatory environment that more closely ties regulatory monitoring to GAAP numbers. The study finds that banks’ choice of the implementation method for SFAS 106 is consistent with an attempt to balance the increased regulatory costs with earnings management benefits. Moreover, banks strategically chose the adoption timing of both SFAS 106 and SFAS 109 to further reduce regulatory costs. The implementation method choice is consistent with a portfolio approach where managers simultaneously consider the existing discretionary accrual levels vis-à-vis the financial reporting effects of impending accounting standards.

Increasingly, attention is being focused on the usefulness of manpower information systems in the firm. The demand for this information emanates from three distinct levels. Level I: Manpower Information for Legal Compliance Decisions. The primary focus here is in developing information systems which provide necessary data for governmental units such as the Department of Health, Education, and Welfare, the Equal Employment Opportunity Commission, the Social Security Administration, and similar organizations which monitor employment practices, collect taxes, or engage in policy-making activities. Level 1I: Manpower Information as an Input to Manpower Planning. In this area, the objective is to provide management with data to be used in making numerous decisions regarding the allocation and pricing of human resources including recruitment, training, utilization, and termination. Level III: Manpower Information as an Input to the Valuation of Human Assets for External Reporting. Here, the objective is to provide independent information in the basic financial reports regarding heretofore unreported human assets possessed by the entity. While the accounting literature on human resources has dealt with all three levels of manpower information systems (e.g., see Picur [1973] and Flamholtz [1974]), most authors have given only cursory attention to the basic economic foundation underlying the existence of unrecorded human assets. Our purpose in this paper is to explore the economic and accounting assumptions underlying this literature and to develop criteria for the employee training conditions under which such assets might exist. In the economic literature, there already exists a reasonably well de-

ABSTRACT: This article presents the findings of a survey of the training directors of the Big Eight public accounting firms and their perceptions of the extent of specific training offered by their firms. A previous article by the authors argued that specific training was a necessary (but not a sufficient) condition for the existence of unrecorded human assets. Our survey results suggest that the bulk of the training provided by the Big Eight firms is perceived to be general rather than specific.

The article provides information on an alternative research methodology course for a master's degree in accounting. With the advent of a more generalized business degree at the master's level, the requirement of a master's thesis has become less common. As a result, many master's degree students never have the opportunity of performing an extensive independent research effort under faculty supervision. The problems facing practicing accountants of the future promise to be increasingly complex. A course providing experience in the employment of investigative techniques may assist the future accountant in analyzing these problems and in developing and appraising alternative solutions to them. The illustrative readings are used to add an accounting perspective to the topic being considered. These illustrative articles were selected in an attempt to put the basic ideas into a context more relevant to the student's interest. Hopefully this background will enable the future practitioner to evaluate the research of others. An ancillary benefit may be provided for those students who choose to contribute to the literature. They should have a stronger methodological base for doing so.