Question: What are the two principal underlying assumptions

> Firm A and B are exactly the same size as are Firm C and Firm D. Firm A acquires for cash 100 percent of the common stock of Firm C. Firm B acquires 100 percent of Firm D by exchanging one share of its own stock for each share of common stock of Firm D.

> What is meant by the term “degrees of representational faithfulness?”

> What are the advantages of convergence-harmonization of accounting standards?

> How do de facto harmonization and de jure harmonization differ from each other?

> How will the role of national standard-setting bodies be affected by adoption of IASB standards?

> For years the FASB had little interest in pursuing international harmonization projects. What prompted its seemingly new interest in 2002 to work with the IASB in such a cooperative manner?

> What are the possible implications if accountants outsource the balance sheet to external appraisers (applying fair value accounting) for period-end financial statement reporting?

> Is Cadenhead’s conception of circumstantial variables as the only permissible departure from prescribed accounting methods closer to finite or rigid uniformity?

> ASR 242 of the SEC states that relative to payments made to foreign governmental and political officials, “. . . registrants have a continuing obligation to disclose all material information and all information necessary to prevent other disclosures made

> Under previous disclosure requirements of the SEC, dividends paid during the past two years to shareholders must be stated in the annual report. This requirement has been broadened: There must be disclosure of any restrictions on the firm’s present or fu

> Is neutrality consistent with the external user primary orientation of SFAC No. 1 and the pervasive constraint (benefits > costs) of SFAC No. 8?

> What is residual income? Abnormal earnings? Economic profit? EVA?

> Finite and rigid uniformity would result in different information being received by users of financial statements. What difference would this make in terms of resource allocation when viewed from a macroeconomic standpoint?

> Using different studies at different times it still appears to be the case that financial executives have a higher threshold for materiality than either Certified Public Accountants or financial analysts who, in turn, have a higher materiality threshold

> How do present magnitudes differ from future contingencies?

> Do you think management policies should be acceptable as potential relevant circumstances? Why or why not?

> What is meant by “information content” and how does capital market research determine the information content of accounting numbers?

> What are the possible benefits of a disclosure process that is integrated with major policies in marketing, production, and finance? Do you think only “good news” items should be disclosed?

> An argument against additional disclosure is that financial analysts aggressively seek this information, which is then sold to their customers, resulting in an adequate market solution to the problem of providing timely and relevant information on securi

> SFAS No. 13 in effect regards a lease period of 75 percent or more as a relevant circumstance in distinguishing between capital and operating leases. What economic factors (cash flow differentials) lie behind this policy choice?

> SFAC No. 6 defines circumstances as follows: Circumstances are a condition or set of conditions that develop from an event or series of events, which may occur almost imperceptibly and may converge in random or unexpected ways to create situations that m

> Should firm’s capitalize research and development expenditures? Why or why not?

> Is the choice of LIFO a relevant circumstance compared to FIFO?

> If uniformity means eliminating alternative accounting treatments, then surely comparability of financial statements of different enterprises would be improved. Do you agree with this statement? Comment.

> Comment on the following statement. “The residual income model is no different from the dividend discount model. Therefore, it has no value to investors and analysts.”

> What are some advantages and disadvantages of using residual income (including economic profit and EVA) for performance measurement?

> Why do we sometimes say that the dividend discount model is actually an earnings model? How does Lintner’s findings relate dividends and earnings?

> Besides the primary investor-creditor group, what other user groups could claim to be stakeholders in the firm? How might their information needs be the same as the primary investor-creditor group? How might their information needs differ?

> What are abnormal returns (AR) and cumulative abnormal returns (CARs)? What do they have to do with research in accounting? What do they have to do with accounting standards?

> What are some limitations of capital market research?

> In what ways do you think information useful for investors (in assessing future cash flows) differs from that useful for creditors (in assessing default risk)?

> If investors are well diversified (e.g., own several hundred stocks), will they have a greater or lesser need for accounting information? What does this say about diversification?

> What is the advantage of being well diversified? Is there a downside? Why or why not?

> Why is the efficient-market hypothesis being challenged?

> Samuelson would use a property rights definition of assets (discussed in the chapter). Do you think that SFAS No. 2 requiring immediate expensing of research and development costs is an example of Samuelson’s property rights approach? Discuss.

> Is it fair to categorize ARS 1 and ARS 3 as failures?

> Conservatism is discussed in paragraphs 91–97 of SFAC No. 2. Why is its role in SFAC No. 2 rather ambiguous? Why is conservatism absent from SFAC No. 8?

> Why do managers of Berkshire Hathaway have an incentive to send cash to Omaha?

> Comment on the following. “Maximizing residual income is the same as maximizing earnings. Managers should be rewarded for maximizing either one.”

> How is accounting data useful to investors? To creditors?

> Very carefully explain why conflicts can exist between prediction of cash flows and accountability. Can these conflicts be resolved?

> SFAC No. 6 is largely a repetition of SFAC No. 3. Discuss two possible reasons why this repetition occurred.

> What is comprehensive income?

> Do you think that the so-called equity theories of accounting are really theories in the scientific sense? If so, how would you classify them?

> Should constituents have input into the FASB decisions, or should the FASB neutrally and independently set standards?

> “The FASB’s standard-setting procedure is a fairly narrow, cut-and-dried approach to developing accounting standards.” Evaluate this statement.

> What has been the SEC’s role in the evolution of the rule-making process? How has that role changed since the passage of SOX?

> Discuss the significance of the SEC’s ASR 150.

> Do you think that the nonbinding status of the FASB’s statements of financial accounting concepts (like that of APB Statement 4) is a good idea or not?

> For a discipline to become a science, the results of experiments and research must be exact. Do you agree with this statement? Discuss.

> If there has been a paradigm shift (scientific revolution) in accounting research, but not in accounting practice, what may this signifiy?

> Why does the decision-model orientation to research accord more closely with the standard-setting function than any of the other research directions?

> In what ways does the FASB differ most markedly from its two predecessors?

> What is the major difference in orientation between positive accounting theory and more overtly normative theories, such as the valuation approaches discussed in Chapter 1?

> How has Sarbanes-Oxley of 2002 affected FASB’s jurisdiction and independence?

> Can any overall trend be detected in FASB pronouncements? Explain and cite examples to substantiate your opinion.

> Do you think that the work of a policy-making organization such as the FASB or the SEC is normative (value-judgment oriented) or positive (oriented toward value-free rules)? Discuss.

> What are some of the pitfalls of empirical research?

> Why must objectives be at the topmost level of a conceptual framework of accounting?

> Several occupations within two of the aforementioned disciplines are listed here. Which do you think come closest to being scientific? Accounting researcher Chief accountant for an industrial firm Medical researcher Doctor (general practitioner)

> Of the four disciplines in the following list, which do you think qualify as sciences and which do not? State your reasons very carefully. Law Medicine Cosmetology Accountancy

> Several years ago an author stated that corporate income could be scientifically ascertained, but any type of adjustment for inflation would be pure folly because measurements would tend to become very subjective. Do you agree with the author’s appraisal

> Discuss how the concept of conservatism may be changing as viewed by Watts.

> What similarities are there between materiality and disclosure?

> Why do companies, even those with “bad news,” have an incentive to disclose financial reporting information?

> At present time, the U.S. federal income tax code allows corporations to deduct interest expense but not cash dividends paid to stockholders. Does the tax code tie in with any of the equity theories?

> Under financial statement insurance why would the relation between the firm and its auditor and investors bear a slight resemblance to the relationship between Saddam Hussein and the weapons inspectors from the United Nations in 2002 and 2003?

> Stewardship is absent from SFAC No. 8; why?

> What is the relationship between the economic consequences of accounting standards and the quality of neutrality presented in SFAC No. 8?

> Would a regular quarterly announcement of earnings-per-share which is “good” be an example of signaling? What about early adoption of a new accounting standard that would reduce income?

> If Watts and Zimmerman are correct that managers of very large firms oppose accounting standards that would raise their income and favor those that would lower it, what policy implications would this have for a standard-setting organization such as the F

> Is capital maintenance oriented toward proprietary theory or entity theory?

> Distinguish among the terms realized, realizable, and realization.

> What does the term “social reality” mean and why are accounting and accounting theory important examples of it?

> In recent years, in-home personal interviews have grown more costly and more difficult to complete. Suppose, however, you have a project in which you need to talk with people in their homes. What might you do to hold down costs and increase the response

> Assume you are planning to interview shoppers in a shopping mall about their views on increased food prices and what the federal government should do about them. In what different ways might you try to motivate shoppers to cooperate in your survey?

> Distinguish between social desirability bias and acquiescence bias.

> How do environmental factors affect response rates in personal interviews? How can we overcome these environmental problems?

> Distinguish among response error, interviewer error, and nonresponse error.

> Describe how you would operationalize variables for experimental testing in the following research question: What are the performance differences between 10 microcomputers connected in a local-area network (LAN) and one minicomputer with 10 terminals?

> One of the hardest aspects of a merger is making the IT systems of the merging companies talk with each other. That problem grows in magnitude when you are talking about merging airlines, Continental and United Airlines. While the ticketing conversion wo

> What type of experimental design would you recommend in each of the following cases? Suggest in some detail how you would design each study:

> You are asked to develop an experiment for a study of the effect that compensation has on the response rates secured from personal interview participants. This study will involve 300 people who will be assigned to one of the following conditions: (1) No

> A pharmaceuticals manufacturer is testing a drug developed to treat cancer. During the final stages of development, the drug’s effectiveness is being tested on individuals for different (1) dosage conditions and (2) age groups. One of the problems is p

> Your class team in research methods has completed a field project for a financial institution on branch location effectiveness. What questions about audience analysis should you answer as you plan your presentation?

> Much Internet advertising is priced based on click-through activity. A prospect is shown an ad on a host website based on search words he or she might have entered in a search engine such as Google or Bing. If the prospect clicks directly on the ad he o

> A lighting company seeks to study the percentage of defective glass shells being manufactured. Theoretically, the percentage of defectives is dependent on temperature, humidity, and the level of artisan expertise. Complete historical data are available f

> What essential characteristics distinguish a true experiment from other research designs?

> What ethical problems do you see in conducting experiments with human participants?

> Why would a noted business researcher say, “It is essential that we always keep in mind the model of the controlled experiment, even if in practice we have to deviate from an ideal model”?

> What ethical risks are involved in observation? In the use of unobtrusive measures?

> Distinguish between the following: a) Internal validity and external validity. b) Preexperimental design and quasi-experimental design. c) History and maturation. d) Random sampling, randomization, and matching. e) Environmental variables and extran

> Below are some terms commonly found in a management setting. Are they concepts or constructs? Give two different operational definitions for each.

> Describe the characteristics of the scientific method.

> What is business research?

> Fill in the missing blocks for the ANOVA summary table on net profits and market value used with regression analysis. a. What does the F tell you? (alpha = .05) b. What is the t value? Explain its meaning.

> Confronted by low productivity, the president of Oaks International, Inc. asks a research company to study job satisfaction in the corporation. What are some of the important reasons that this research project may fail to make an adequate contribution to

> It costs thousands of dollars to generate an application (apps) for the Apple iPad. Just offering an APP is not a guarantee of success. The most successful APPS, sold as downloads, have to offer true functional value. Apple takes weeks to review an app

> A company is experiencing a poor inventory management situation and receives alternative research proposals. Proposal 1 is to use an audit of last year’s transactions as a basis for recommendations. Proposal 2 is to study and recommend changes to the pro

> Assume you are Hallmark. You have identified four new themes for your Hispanic-targeted cards, Sinceramente Hallmark. You now need research to help your card designers create cards that correctly execute those themes. What research should you do now?