Business Commons^™

Ideological Diversity In Standard Setting, Jivas Chakravarthy

Accounting Faculty Articles and Research

I explore whether the level of ideological diversity among Financial Accounting Standards Board (FASB) members has declined since the emergence of their conceptual framework. I analyze votes made by FASB members on Statements of Financial Accounting Standards and compare them to comment letters submitted by constituent sponsoring organizations. I demonstrate that, relative to the Pre-CF regime (1973–1986), FASB members’ voting positions in the CF regime (1987–2007) are (i) less like their constituent sponsors and (ii) more like one another. The former result is primarily attributable to differences between FASB members with auditor and preparer backgrounds and those groups’ sponsors. Both …

Transaction Complexity And The Movement To Fair Value Accounting, Pinky Rusli, Xinlei Zhao, David A. Ziebart

Institute for the Study of Free Enterprise Working Papers

Our global economy has pushed the complexity of business transactions to a new level, as companies now employ sophisticated contracts and financial instruments. However, it is unclear whether accounting standards are able to effectively capture transaction complexity, which has been growing at a rapid pace. In this study, we examine three questions related to transaction complexity: (1) Do accounting standards reflect differences in the complexity of the transactions being recorded? (2) Does the use of mark-to-market (i.e., fair value) accounting reduce the complexity of standards by relying on market valuations to capture transaction complexity? (3) Does the reliance on fair …

Accounting For Agricultural Products: Us Versus Ifrs Gaap, Treba Marsh, Mary Fischer

Faculty Publications

Currently there is a mix of accounting guidance for agriculture producers in the US that is both GAAP including Accounting Statement Codification 905 and non-GAAP financial guidelines. Should the US adopt International Financial Reporting Standards (IFRS), this guidance would be replaced with International Accounting Standard (IAS) 41 – Agriculture.

This study identifies systematic differences between the US and International accounting and reporting for agricultural assets and products. The study also finds that international and US agricultural accounting recognition and reporting guidance result in dissimilar reporting due to guidance interpretation. Valuation variances and definition differences including the requirement to change the …

Changing And/Or Funding Opeb Promises: A Typology Of Local Government Responses To Gasb 45 And The Realization Of Opeb Liabilities, Juita-Elena Yusuf, Thomas Musumeci

School of Public Service Faculty Publications

GASB Statement No. 45 addresses how governmental units account for employees' other post-employment benefits (OPEB), requiring government employers to replace OPEB reporting on a pay-as-you-go basis with an accounting of the cost of current and future benefits. This requirement and the resulting OPEB liability may prompt government employers to reconsider key questions regarding their OPEB provision. The size of the OPEB liability depends on both the benefit promises made to employees and the assets to fund these promises. We propose a typology that defines four approaches for governments to respond to GASB 45 and their OPEB liabilities. These approaches represent …

How Lehman Brothers Used Repo 105 To Manipulate Their Financial Statements, Agatha Jeffers

Department of Accounting and Finance Faculty Scholarship and Creative Works

The questionable accounting technique, known as Repo 105, allowed Lehman Brothers to temporarily appear healthier in the eyes of its investors, creditors and other interested parties. These material transactions had the ability to affect the decisions of prudent persons. Nevertheless, Lehman failed to disclose these transactions in the notes to their financial statements and in their filings to the SEC. In this paper, an examination is made of whether Repo 105 transactions were properly recorded and disclosed in Lehman's financial statements and whether Lehman's executives behaved ethically. To answer these questions, an examination is made of Generally Accepted Accounting Standards, …

Fair Value Measurement: What’S New? Teaching Note, Danny A. Pannese, Alan Delfavero

WCBT Faculty Publications

As the international economic landscape has become increasingly integrated, the argument for the development of uniform global accounting standards now exists. In an effort to achieve this objective, the Financial Accounting Standards Board, as part of the ongoing Convergence Project with the International Accounting Standards Board, released groundbreaking accounting standards, FAS157 & FAS159, in 2006 and 2007, respectively. Modeled after an international accounting standard, these standards pertain to the use of fair value accounting (FVA), and are the first of their kind as they provide a definition of FVA and an option to expand its use to certain financial instruments. …

Discretionary Behavior With Respect To The Adoption Of Sfas 142 And The Behavior Of Security Prices, Yoonseok Zang

Research Collection School Of Accountancy

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 142, Goodwill and Other Intangible Assets, which takes a very different approach to how goodwill is accounted for subsequent to the initial recognition. The new statement requires that goodwill no longer be amortized, but instead requires a transitional goodwill impairment (initial impairment loss or IIL) test in the adoption fiscal year and an annual impairment test thereafter. Since SFAS 142 allows firms substantial judgment in the adoption year in determining the amount of impairment loss, this dissertation first examines management discretionary behavior in measuring the IIL. The result shows …

The Convergence Of Accounting Standards Or The Next Revolutionary Change In The Accounting Industry, Mariya Smantser

Honors College Theses

In the past five years the accounting industry has undergone major transformations. A wave of corporate scandals that began with Enron shook accounting's foundations, and led to passage of the Sarbanes Oxley Act of 2003. As the industry is absorbing and implementing the new requirements of the Sarbanes Oxley Act, it has yet another development on the horizon -- the pressure of convergence of accounting standards between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). Marie Kling, senior manager in PWC, summarizes the current situation: "The train heading towards global GAAP has left the station, …

Assessing Internal Audit Quality, Audrey A. Gramling, Scott D. Vandervelde

Faculty and Research Publications

Internal audit quality is an issue of great importance to both the internal and external audit professions. PCAOB Auditing Standard No 2 highlights this importance when addressing the reliance that the external auditor can place on the internal audit work product. The study discussed here experimentally tests the influence of the source of the internal audit function on both the internal and external auditors' evaluation of the quality of the internal audit function. To assess the importance of the internal audit function's sourcing arrangement in the internal audit function's quality assessment, the researchers employ a case study approach, modifying a …

Fraud Requirements In Ssars 10, Michael D. Akers, Jodi L. Gissel

Accounting Faculty Research and Publications

With the issuance of Statement on Standards for Accounting and Review Services (SSARS) 10, Performance of Review Engagements, which is effective for review engagements for periods ending on or after Dec 15, 2004, the AICPA Accounting and Review Services Committee requires accountants performing review engagements to make inquiries regarding fraud. Furthermore, the management representation letter must address fraud. The authors reviewed the comment letters that the AICPA received in response to the exposure draft for SSARS 10 and conducted a survey of practitioners after the statement was issued. SSARS 10 amends SSARS 1, Compilation and Review of Financial Statements, primarily …

Cpas' Perceptions Of The Impact Of Sas 99, Donald C. Marczewski, Michael D. Akers

Accounting Faculty Research and Publications

In November 2002, the Auditing Standards Board (ASB) issued Statement on Auditing Standard 99, Consideration of Fraud in a Financial Statement Audit. Although SAS 99 was developed before the recent accounting scandals, its release came in their wake. The ASB crafted SAS 99 in response to perceived inadequacies in its predecessor, SAS 82. A questionnaire was sent to a random sample of 300 Wisconsin CPAs selected from the membership of the Wisconsin Institute of CPAs, which included 150 partners and 150 managers from Wisconsin public accounting firms. The response rate was 35%, with an almost equal balance of partners and …

The High Road, Jane E. Campbell, Heather M. Hermanson, John P. Mcallister

Faculty and Research Publications

Discusses the obstacles to international accounting standards convergence. Effort of the International Accounting Standards Committee (IASC) to promote to convergence theme; Comparison between the convergence frameworks of the U.S. Securities and Exchange Commission and the Financial Accounting Standards Board; Sections of the 'Framework for the Preparation and Presentation of Financial Statements' document issued by the IASC.

Measuring The Degree Of International Harmony In Selected Accounting Measurement Practices, Emmanuel N. Emenyonu, Ajay Adhikari

WCBT Faculty Publications

The I-index developed by Van der Tas and chi square tests suggested by Tay and Parker are used to quantify and assess the degree of harmony in selected accounting measurement practices of large companies from France, Germany, Japan, the UK, and the US. The results indicate significant differences in accounting for inventory, fixed assets, and investments among the countries. The 3 sub-topics that exhibited a high degree of harmony were the treatment of gains or losses on the disposal of fixed assets, short-term investments and long-term investments, a reflection of the preference of regulators and companies in the different countries …

Global Auditing And Accounting Confusion, John P. Mcallister, Larry L. Orsini, John D. Gould

Faculty and Research Publications

The article discusses about the accounting and audit standards in the United States, which is different from one country to another due to business practices, fiscal systems and the law regulating a company. The International Federation of Accountants and the International Accounting Standards Committee aimed to a have a consistency of audit and accounting standards around the world, although these diversities can easily identify a company's national origin and as a basis of the financial statements presentation.

Is International Reciprocity Possible?, Abdel M. Agami, Karen Cascini

WCBT Faculty Publications

Even though there seems to be almost unanimous acceptance among countries that professional accountants must be educated, pass some professional examinations, and have some practical experience, the recipe for the quantity of each of the 3 ingredients varies from one country to another. To determine if international reciprocity is possible, the professional accountancy qualifications of 8 countries were surveyed: Australia, Canada, France, Germany, Japan, New Zealand, the UK and the US.

Raising Capital Overseas, John D. Gould, John P. Mcallister, Larry L. Orsini

Faculty and Research Publications

The article states that more and more companies are trying to raise capital by listing their securities for sale on foreign exchanges.More and more companies are trying to raise capital by listing their securities for sale on foreign exchanges. However, the way financial statements are prepared varies from one country to the next. U.S. companies looking to raise capital abroad must consider the myriad rules regarding financial statement presentation just as foreign companies listing stock in the United States must adhere to the rules and regulations of the Securities and Exchange Commission. Similarly, the costs of reconciling U.S. accounting standards …

International Convergence Of Accounting Standards: The Case Of The Australian Foreign Currency Standard, K. Cooper

Faculty of Business - Accounting & Finance Working Papers

For some time, there has been a push towards the harmonisation of accounting standards throughout the world. Given international trade in corporate securities and the growth of multinational companies, the harmonisation of accounting standards is clearly desirable. However, as this paper shows, full harmonisation is unlikely to be achieved. The reason for this is that accounting standards are not merely technical rules. They have economic consequences and, thereby, have political implications for both the preparers and users of financial statements. The fact that economic conditions vary from country to country, means that accounting methods that are acceptable in one country …

Abnormal And Extraordinary Items - Time For Another Change?, R. P. Shannon, B. Mccartney

Faculty of Business - Accounting & Finance Working Papers

This paper highlights some major problems which have arisen with the recent introduction in Australia of new definitions of abnormal and extraordinary items in AASB 1018 "Profit and Loss Accounts", which have brought our definitions more in line with international definitions in U.K., U.S.A. and Canada. Evidence exists from an examination of the disclosures of these items by the top 150 listed Australian holding companies. over the period from 1987-1990.that the new definitions are still subjective and inappropriately allow the inclusion of ordinary operations items which are of a non-recurring nature in the operating profit before abnormal items figure and …

Goodwill: A Shareholder Perspective, M. M. Greenwell, G. E. Tibbits

Faculty of Business - Accounting & Finance Working Papers

Accounting theory according to various authors including Ijiri (1975), Gaa (1988), Ruland (1989) supports the concept that accounting standards should serve the information needs of users. This paper examines the controversy in Australia surrounding accounting for goodwill and reports on a survey of shareholders in a large Australian public company. Alternative classifications of shareholders are examined to identify whether any classifications display an association with the choice of the preferred method of accounting for goodwill. The level of support for the accounting standard is also examined.

Accounting Standards Overload Problem - A Suggested Solution, R. P. Shannon

Faculty of Business - Accounting & Finance Working Papers

The paper supports the Australian approach to differential reporting as the best solution to the accounting standards overload problem. The approach requires a technique for differentiating "reporting" and "non-reporting" entities: The paper suggests a technique for such differentiation which is thought to be superior to the current suggested technique. Finally. the paper suggests that non-reporting entities should still ensure appropriate information is produced which not only assists management in their decision making but also provides government with details which can be used in the formulation of policies to assist them in the future.

The Information Content Of Withdrawn Audit Qualifications: New Evidence On The Value Of "Subject-To" Opinions, L. Paige Fields, Michael S. Wilkins

School of Business Faculty Research

Statement on Auditing Standards No. 58 (AICPA 1988) effectively eliminated the "subject-to" audit opinion which auditors used to highlight financial statement uncertainties. Elimination of the "subject-to" report implied the Auditing Standards Board's belief that the opinion conveyed no material information to users. Several market-based studies of the value of "subject-to" opinions have yielded mixed results. A major limitation in most of these studies was a lack of precision in identifying the exact date upon which information, if any, was revealed to the market.

This study extends the previous work by examining the common share price reactions to public announcements of …

New Accounting Rules For Special Assessments, James Trebby, Robert Yahr

Accounting Faculty Research and Publications

In 1979, the National Council on Governmental Accounting's Statement One eliminated several inconsistencies in governmental accounting. However, accounting for special assessments was never fully resolved. After several revisions, the Governmental Accounting Standards Board (GASB) issued Statement 6 in January 1987. Assessments typically are divided into those providing capital improvements and those providing services. The new accounting and financial reporting requirements include: 1. special assessments for operating services provided to the public, 2. accounting for debt service for which no government has an obligation in an agency fund, and 3. reporting a direct capital expenditure or a transfer to a capital …