Nonsubsidiary investment, Minority interest, Valuation, Historical price

Net income, EBIT, Dichotomy of Earnings, Operating Income

Transfer Pricing

This article focuses on a study which demonstrated how similar types of standard cost variance analysis may be applied to the control of the application and performance of formal decision models. Previous efforts to improve the usefulness of standard cost variance analysis have tended to focus on one of two related problems. Proposals have been offered that had as their objective either an improvement in the types of variances the accountant should calculate or in his methods for analyzing the significance of observed variances. The essential difference between process control and model control lies in the type of response management should make to an observed variance. The appropriate response by management depends upon the expected source of the deviation. Traditionally, standard cost systems have concentrated on the analysis of type 1 and type 2-a deviations. These systems have not been designed to indicate when and if type 2-b deviations are critical to the decision process.

ABSTRACT: This paper investigates the extent to which models based on financial and market variables predict auditors' decisions to issue qualified audit reports in situations involving contingencies or uncertainties. A probit model is developed with the dependent variable indicating whether the firm received a qualified opinion, and the independent variables representing publicly available financial and market variables. The estimated model distinguishes between unqualified (clean) opinions and first-time qualifications and between types of qualifications (e.g., going concern, litigation, asset realizing, and multiple qualifications) in the year of the qualification, for both an estimation sample and a holdout sample. The predictive accuracy of the estimated model is evaluated in terms of misclassification costs for alternative costs of type I and type II errors and for specific prior probabilities of qualified and clean opinions.

[This paper investigates the extent to which models based on financial and market variables predict auditors' decisions to issue qualified audit reports in situations involving contingencies or uncertainties. A probit model is developed with the dependent variable indicating whether the firm received a qualified opinion, and the independent variables representing publicly available financial and market variables. The estimated model distinguishes between unqualified (clean) opinions and first-time qualifications and between types of qualifications (e.g., going concern, litigation, asset realizing, and multiple qualifications) in the year of the qualification, for both an estimation sample and a holdout sample. The predictive accuracy of the estimated model is evaluated in terms of misclassification costs for alternative costs of type I and type II errors and for specific prior probabilities of qualified and clean opinions.]

ABSTRACT: This paper provides a critical review of the FASB's Statement on Objectives and of its Exposure Draft on the elements of financial accounting. First, the FASB's statements are compared with those of the previous authoritative bodies. Little that is new and little that can be expected to aid in the resolution of accounting issues can be found in the FASB's Statements. If the previous authoritative statements on objectives (and conceputal framework) can be adjudged failures, there is reason to believe that the present effort will have a similar future. Second, the reasons for such failure are considered and it is found that objectives of financial accounting do not have an unambiguous interpretation. Several explanations as to why accountants continue to seek an authoritative definition of objectives (and conceptual framework) are offered and some modest proposals for the "objectives of the FASB" are discussed at the end of the paper.

Nicholas J. Gonedes, Nicholas Dopuch, Stephen H. Penman, Disclosure Rules, Information-Production, and Capital Market Equilibrium: The Case of Forecast Disclosure Rules, Journal of Accounting Research, Vol. 14, No. 1 (Spring, 1976), pp. 89-137

We experimentally investigate the effects of a mandatory increase in education on the market for professional labor services when several service qualities are assumed to exist. We show that when suppliers have insufficient incentives to offer high‐quality services in a free market, an increase in mandatory education can improve the coordination of supplier decisions and increase efficiency. If suppliers voluntarily provide a sufficient quantity of high‐quality services, an education constraint can have the opposite effect. In both instances, however, an increase in the mandatory level of education can be expected to reduce the price of high‐quality services while increasing the price of lower service qualities. Résumé. Les auteurs ont procédé à une analyse expérimentale des conséquences qu'aurait une hausse imposée du niveau d'études sur le marché des services professionnels, si l'on suppose l'existence de plusieurs qualités de services. L'analyse démontre que lorsque les stimulants sont insuffisants pour inciter les fournisseurs à offrir des services professionnels de qualité supérieure dans un marché libre, une hausse imposée du niveau d'études peut améliorer la coordination des décisions des fournisseurs et augmenter l'efficience. Si toutefois les fournisseurs offrent de leur propre chef une quantité suffisante de services de qualité supérieure, le fait d'imposer un niveau d'études supérieur peut avoir l'effet contraire. Dans les deux cas, on peut s'attendre à ce qu'une hausse du niveau d'études obligatoire réduise le prix des services de qualité supérieure tout en augmentant le prix des services de qualité plus faible.

Reviews the book "Topics in Cost Accounting and Decisions," by Harold Bierman.