Historic cost, Market value, Replacement cost, Inventory

This empirical study is a response to the FASB's call for further research into the properties of alternative accounting measurement methods. There exists no empirical evidence on the time‐series properties and predictability of general price level (GPL)‐adjusted annual earnings data. In order to assess the effect of the monetary gains or losses on the stochastic properties of GPL‐adjusted data, earnings were calculated both with and without inclusion of the monetary gains or losses. The results of the time‐series analysis of the earnings series across the alternative accounting methods indicated that (a) just under one‐half of the historical cost (HC) series followed a random‐walk‐type process with most of the remainder being autoregressive, and (b) the GPL series showed substantially fewer following a random walk process with a corresponding increase in the number of stationary series (modeled as autoregressive or white noise processes). The predictive ability results were consistent with the time series findings. That is, application of a random‐walk model to the HC series indicated that these series were fairly well‐represented by the random walk, but a similar application to the GPL series confirmed that these series were not as well‐represented by a random walk. Résumé. L'étude empirique qui fait l'objet du présent article a été effectuée en réponse à l'invitation du FASB à poursuivre les recherches sur les attributs des méthodes de mesure comptable de rechange. Il n'existe aucune démonstration empirique des attributs des séries chronologiques et de la valeur prédictive des données relatives aux bénéfices annuels indexés sur le niveau général des prix (N.G.P.). En vue d'évaluer l'incidence des gains ou des pertes monétaires sur les propriétés stochastiques des données indexées sur le N.G.P., les bénéfices on été calculés à la fois avec et sans la prise en compte des gains ou des pertes monétaires. Les résultats de l'analyse chronologique des séries de données relatives aux bénéfices à travers les différentes méthodes comptables ont donné lieu aux constatations suivantes: a) à peine moins de la moitié des séries de données au coût d'origine (C.O.) ont connu des variations de type aléatoire, la plupart des autres séries étant autorégressives, et b) beaucoup moins de séries de données indexées sur le N.G.P. ont affiché des variations aléatoires avec une augmentation correspondante du nombre de séries stationnaires (modélisées comme étant autorégressives). Les résultats relatifs à la valeur prédictive étaient compatibles avec les résultats de l'analyse chronologique. En d'autres termes, l'application d'un modèle aléatoire aux séries de données au C.O. a permis de constater que ces séries sont assez bien représentées par la méthode aléatoire, mais l'application du même modèle aux séries de données indexées sur le N.G.P. confirme que ces séries ne sont pas aussi bien représentées par la méthode aléatoire.

An examination of analysis of variance, Anova design, which includes a blocking factor, must start with an understanding of the effect of the blocking factor on the dependent variable the cumulative abnormal return or CAR. The design includes a separate mean for each block. The effective value of each observation's CAR is thus transformed into the deviation of the original CAR from the mean CAR of the two firms control and switch in the pair of firms. The ANOVA then estimates the main effect of switch vs. control, factor A as the difference between the CAR deviations from the pair means. The other main effects and their interact modify these estimations to allow for the possible effect of signs of the forecasted change in earnings. A test of this main effect then constitutes a test of the market effect of the decision to switch to lifo. An ANOVA, of course, has only one ESS. ESS is defined to be the error term in an ANOVA. An examination of a standard statistics book would have revealed this statement to be inaccurate. Any ANOVA design that has a blocking factor combined with one more crossed factors will necessarily have more than one error term. Error term is actually ambiguous in an ANOVA. Specifically one error term excluding the between-block sum of squares will be used for analysis of any effect that includes the blocking factor while a second error term including the between-block sum of squares will be needed for analyzing effects that do not include the blocking factor. When a blocking factor is used, the observations from a given block must be placed in cells whose factor levels differ only for the blocking factor.

The article focuses on computer-assisted instruction (CAI) for elementary accounting. CAI materials for a two-semester elementary accounting course are being developed at the University of Illinois at Urbana-Champaign. The intent of the present paper is to report the progress of CAI, which has potential for great effectiveness in accounting education in anticipation of avoiding unnecessary duplication of costly effort in this area and to present results of a controlled experiment conducted during the Fall 1973 semester using the completed materials developed for the first semester, accounting principles course. One of the major advantages of materials developed in this project is their adaptability to improvement. This paper presents a discussion of objectives of the project, CAI system used, the approach taken and the experience to date in achievement of objectives. Objectives of the project, started in June 1972, include improvement of instruction in the elementary accounting sequence at the University of Illinois.

The article explores the goal congruence of net realizable value (NRV). The NRV model would have various properties after the evaluation of a decision at the end of period T to hold an asset. A correct decision was made if the NRV income for period T+1 is positive. The NRV income for period T+1 will be negative if an incorrect decision was made at time T. The decision at the end of period T to hold an asset may have been correct is the NRV income for period T+1 is negative. However, if it was correct, another condition must hold.

The article focuses on an assignment developed to teach accounting students the use of test decks in verifying the performance of an operating data processing system. The assignment was developed in a manner which minimizes both class time and student time required to give the students a clearer understanding of the use of test decks and their limitations. Only one additional class hour was required. Since most of the additional class time is spent orienting the students to a realistic computer accounting program, the time spent should not be considered as solely aiding the test deck presentation in that the instructor can later use the students' exposure to a typical computer application as a basis in discussion of further computer-related topics and/or contrast with similar manual systems. The program used to process the student test decks actually simulates a payroll program. Since many parameters which affect payroll processing change frequently, most of them are read by the program as data at the beginning of each run. The program will process a batch of up to 200 student decks in one run.

The article discusses the additivity of net realizable values. Very little attention has been given to solving the problem of addition in current value accounting statements--adjusted historical cost, current replacement cost or net realizable value. With few exceptions, the implicit assumption has been made that as long as the items in the statement are measured in or adjusted to current terms, the addition will be valid. This assumption may be wrong at least part of the time particularly when applied to net realizable value. The realizable value of a group of assets will be computed as the maximum sum of the net realizable value of the various assets, the maximum level of aggregation before valuation being determined by the fact that a nonzero net realizable value must be derived from a verifiable market price. The objection might be raised that this computation for assets involves measurement of prices for assets or groups of assets followed by comparisons of these prices. The question of asset grouping must be answered satisfactorily before a net realizable value model can be completely developed and applied in general. The answer to this question will be provided through an examination of some general cases of asset interaction.

One of the major criticisms of accountants in recent years has been their failure to present financial statements which have current relevance. Several individuals and groups have published theoretical descriptions of accounting systems based either partly or wholly on some form of current value. This, however, has not completely solved the problem since little or no work has been done to investigate the feasibility or practical implications of these models. There are several reasons for the lack of innovation aimed at improvement of the relevance of published financial statements. The public, investors, analysts and small creditors, do not have the direct power that management and large lenders have to demand more relevant statements. Corporate accountants have in large measure tended to concentrate on refining existing techniques rather than developing basic new methods of presenting information. For these reasons, the lead in determining the feasibility of the current-value-based models has fallen mainly to the academic accountant, who has a minimum of vested interest in maintaining the status quo and a maximum interest in improving statement presentation.

Informational Content, Interim expenses, Interim Sales, Interim Earnings