A valuation system partitions the set of goods to be valued into multiple disjoint subsets and the current value of the goods is estimated via price indexes covering these subsets. Efficient valuation systems yield a relatively small economy‐wide average of mean squared errors with respect to the true total current cost of the goods. Several algorithms have been designed to search for efficient valuation systems. These algorithms, however, do not take advantage of the information contained in the characteristic parameters of the goods to be valued. We present the design and test of a search algorithm that is substantially more efficient than those in the literature. The relative efficiency of the algorithm is gained through the use of information contained in the weights, the expected values, and the variance‐covariance structure of the price changes of the goods. Résumé. Un système d'évaluation subdivise l'ensemble des biens à être évalués en plusieurs sous‐ensembles disjoints et la valeur actuelle des biens est estimée grâce à des indices de prix couvrant ces sous‐ensembles. Des systèmes d'évaluation efficaces produisent, pour l'ensemble de l'économie, une moyenne relativement faible des erreurs moyennes au carré, par rapport au coût actuel réel total des biens. Plusieurs algorithmes ont été conçus pour découvrir des systèmes d'évaluation efficaces. Toutefois, ces algorithmes n'intègrent pas l'information que renferment les paramètres caractérisant les biens à évaluer. Nous présentons la conception et le test d'un algorithme de recherche qui s'avère considérablement plus efficace que ceux mentionnés dans les recherches antérieures. L'efficacité relative de cet algorithme est obtenue grâce à l'intégration de l'information contenue dans les pondérations, les valeurs espérées et la structure de variance‐covariance des fluctuations de prix des biens.

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.

Claims about the benefits to be derived from dichotomizing income into current operating profit (COP) and holding gain (HG) are examined in this article. Separability of an asset from the risk of change in its price is shown to be a necessary and sufficient condition for separate evaluation of the operating and holding decisions with respect to the asset. When risk is separable, the appropriate breakdown of income into operating and holding components is defined. When the risk is not separable, no meaningful breakdown is possible. Other claims for a COP-HG dichotomy, e.g., the usefulness of COP in making various business decisions and interfirm and interperiod comparisons, are shown to be unjustified. In the absence of benefits, the direct cost of compiling data positively unattractive. The arbitrary nature of this dichotomy is illustrated through the construction of an equally defensible alternative.

The article reviews the book "Performance Measurement of the Petroleum Industry," by Alan R. Beckenstein, Leslie E. Grayson, Susan M. Overholt and Timothy F. Sutherland.

This paper reports market experiments in which human traders are replaced by "zero-intelligence" programs that submit random bids and offers. Imposing a budget constraint (i.e., n ot permitting traders to sell below their costs or buy above their valu es) is sufficient to raise the allocative efficiency of these auctions close to 100 percent. Allocative efficiency of a double auction deri ves largely from its structure, independent of traders' motivation, intelligence, or learning. Adam Smith's invisible hand may be more powerful than some may have thought; it can generate aggregate rationality not only from individual rationality but also from individual irrationality.

We investigated the benefits (more accurate valuations) obtained from the use of more specific measures, such as the use of specific price indexes, rather than a general price index, to approximate the current value of historical cost accounting numbers. We found the valuation accuracy function for the Canadian economy to be highly convex; that is, marginal gains in accuracy decline sharply as the specificity of price indexes increases. A few broad price indexes yield a relatively accurate valuation of assets, and little accuracy is gained by using more specific price indexes. These results are consistent with empirical studies conducted in the United States (Hall 1982; Sunder and Way mire 1983; Shriver 1986) and Australia (Tippett 1987). These results suggest that Canadian standard setters may be able to achieve their objective of getting relatively accurate valuations for industrial assets by adopting a simple and verifiable price index methodology, rather than resorting to costly and complicated computations such as those required by Canadian Institute of Chartered Accountants (CICA) Handbook Section 4510. Résumé. Les auteurs étudient les avantages (évaluations plus exactes) de l'utilisation plus grande de mesures spécifiques — comme celles d'indices des prix spécifiques plutôt que d'un indice des prix général — pour obtenir la valeur actuelle approximative des données produites par la comptabilité au coût d'origine. Ils constatent que la fonction d'exactitude de l'évaluation pour l'économie canadienne présente une grande convexité, c'est‐à‐dire que les gains marginaux en exactitude déclinent abruptement lorsque la spécificité des indices de prix augmente. Quelques grands indices des prix livrent une évaluation relativement exacte de l'actif, et l'on gagne peu d'exactitude en utilisant des indices des prix plus spécifiques. Ces résultats sont conformes aux études empiriques réalisées aux États‐Unis (Hall, 1982; Sunder et Waymire, 1983; Shriver, 1986) et en Australie (Tippett, 1987). Les résultats portent à croire que les responsables canadiens de la normalisation pourraient être en mesure d'atteindre leur objectif d'évaluations relativement exactes, dans le cas des actifs industriels, en adoptant une méthodologie d'indice des prix simple et verifiable plutôt que de recourir à des calculs onéreux et complexes comme ceux qu'exige le chapitre 4510 du Manuel de l'I.C.C.A.

We investigate the effect of shareholder activism on debtholders by examining a sample of bank loans for firms targeted by activist hedge funds. We compare loan spreads before and after intervention and show the effects of heterogeneous shareholder actions. Spreads increase when shareholder activism relies on the market for corporate control or financial restructuring. In contrast, spreads decrease when activists address managerial entrenchment. Furthermore, the effects are more pronounced when pre-existing governance mechanisms are weak. Our findings suggest that shareholder activism does not necessarily exacerbate bondholder-shareholder conflicts of interest and highlight the role of activism in aligning investors.

Charles R. Plott, Shyam Sunder, A Synthesis, Journal of Accounting Research, Vol. 19, Studies on Standardization of Accounting Practices: An Assessment of Alternative Institutional Arrangements (1981), pp. 227-239