Question: What type of measurement scale (nominal, ordinal,

> A frequent argument is that inductive reasoning is value-free because it simply investigates empirical evidence. Yet some charge that it is not value-free. What do you think is the basis for this charge?

> In accounting, deductive approaches are generally normative. Why do you think this is the case?

> Why do you think that ethnographic research (footnote 65) would be difficult to apply to organizations such as the SEC and FASB?

> If accounting were not regulated, we would not be facing the difficult problems that have arisen as a result of Enron and other corporate auditing failures. Do you agree with this statement? Explain.

> What are the arguments against regulation of financial reporting?

> How do agency theory and the codificational viewpoint differ in assumptions about the behavior of individuals?

> In terms of financial reporting in the future, do you expect greater refinement of measurements appearing in the body of the financial statements or increasing disclosure with less effort directed toward refinement of measurements?

> It was suggested many years ago that a court should be created to resolve disputes in accounting. In what ways does the FASB function as an accounting court? In what ways is it different?

> Horngren (1973) believes that accounting standards must be marketed by regulatory bodies. By this he means that affected parties need to be sold on the benefits of standards. How is this concept consistent with the nature of regulation?

> Explain how the role and form of research used by the APB and FASB differ.

> What are the arguments favoring regulation of financial reporting?

> Evaluate Stewart’s (2009) discovery of a single overarching ratio, EVA Momentum, which is “superior to all other ratios.”

> Why do high levels of accruals appear to be mispriced?

> What were the politics that led to the demise of both the CAP and the APB?

> Why are accounting ratios valuable for predicting bankruptcy? What cautions do we need in evaluating accounting ratios?

> There is evidence that investors do not fully recognize the valuation effects of severe pension underfunding. (See for example Franzoni, Francesco and José M. Marín (2006). Why do you suppose this is the case? What changes could be made to mitigate this

> What do pensions have to do with a company’s operating performance? What do pensions have to do with the firm’s financing and investment decisions?

> Why is it important to improve the quality of accounting standards?

> Instead of employing capital markets research techniques (e.g., event studies) why don’t we just ask investors how they would react to a hypothetical event? Why don’t we ask managers why they make specific accounting changes?

> Give some examples in which accounting information is not the most timely source of information affecting security prices.

> Suppose an accounting event occurs and there is no market reaction. What should we conclude?

> What is the incomplete revelation hypothesis?

> Why does post-earnings announcement drift appear to be more pronounced with smaller firms? What could be done from a company perspective to rectify this situation? What could be done from a standard setting perspective to mitigate the effects of PEAD?

> In late 1990s, the “Wyden Amendment” was stricken from the Crime Bill passed by Congress. The amendment would have required reporting by auditors on internal controls. Letters sent by FEI members opposing the amendment were instrumental in its defeat. Th

> What is post-earnings announcement drift (PEAD)?

> Lev talks about the low correlation between earnings and stock returns. Ou and Penman paper discuss the possibility of making abnormal returns based upon published financial data. Are these papers in conflict with each other or complementary to each othe

> The three attempts at standard setting in the private sector (CAP, APB, and FASB) have all dealt with the need for a theoretical foundation. Why were the CAP and the APB unsuccessful at this endeavor?

> What is the importance of the FAF and FASAC to the success of the FASB?

> Why may accounting policies with no direct cash flow consequences indirectly affect investors or creditors?

> Over the years, the research findings regarding changing from FIFO to LIFO have varied? Why do you suppose this is the case?

> As an investor, how would you react to a company changing is inventory accounting from FIFO to LIFO? Why?

> Why is the choice between the FIFO-LIFO inventory methods an interesting issue in capital market research?

> Describe the general findings from capital market research concerning the information content of accounting numbers and the effects of alternative accounting policies.

> What is classification shifting?

> How does the term “embedded derivatives” compare with the term “embedded journalists” (from the Iraqi War)?

> In what two different senses is the term pro forma used?

> Are disclosures of hedging effectiveness effective?

> Of the various reasons that a firm might deal in its treasury stock, are there any that you might think are questionable? Discuss.

> Why do you think earnings is managed when it appears that actual income might be less than management’s voluntary forecasts of earnings?

> What are the benefits of evaluating a CEO based on the sum of earnings and cash flow divided by two? What is the downside to this metric? Make sure you clearly identify which cash flow and earnings you use in your calculation.

> Do you think that the color-coded terrorist threat system instituted by the Department of Homeland Security involves a measurement system? Explain.

> Did the 21st century begin on January 1, 2000?

> Political factors are an adverse influence on the accounting standard-setting function. Discuss this statement.

> Are issues of costliness and timeliness as they pertain to accounting standards part of accounting theory?

> How do measurement and calculation in accounting differ from each other? Give three examples of each.

> Does the statement of cash flows obviate the possible need for exit price financial statements?

> Why is discounted cash flow extremely difficult to implement in the accounts?

> How do entry- and exit-value approaches differ?

> If general price-level adjustment is concerned with the change over time of the purchasing power of the monetary unit, why is it not considered to be a current value approach?

> Some individuals believe that valuation methods proposed by a standard-setting body such as FASB should be based on those measurement procedures having the highest degree of objectivity as defined by Equation (1.1). Thus, some assets might be valued on t

> Accounting practitioners have criticized some proposed accounting standards on the grounds that they would be difficult to implement because of measurement problems. They therefore conclude that the underlying theory is inappropriate. Assuming that the c

> A great deal of interest is generated each week during the college football and college basketball seasons by the ratings of the teams by the Associated Press and United Press International. Sports writers or coaches are polled on what they believe are t

> Can assessment measures be used for predictive purposes?

> The measurement process itself is quite ordinary and routine in virtually all situations. Comment on this statement.

> Is accounting theory, as the term is defined in this text, exclusively developed and refined through the research process?

> Comment on the following statement: Cash flow from operating activities is the most important section of the SCF. Hence, analysis should be focused on this section.

> How can political factors be an input into accounting policy-making if the latter is concerned with governing and making the rules for financial accounting?

> Of the three inputs to the accounting policy-making function, which do you think is the most important?

> 1.Refer to either a current intermediate accounting text or a guide to current “generally accepted accounting principles.” Give at least one example for each of the four cells of Exhibit 9-1 (your instructor may desire to modify this problem). 2. Compare

> Williams and Ravenscroft (2015) question decision usefulness as the basis for accounting standards. Take a position and argue its merits.

> Do you see an evolutionary process involving the documents and reports presented in this chapter? Explain.

> How can accounting move more toward becoming a science rather than an art? Discuss.

> What role should the AICPA assume in the possible development of “baby GAAP” standards?

> If you could relate materiality, disclosure, and conservatism to types of measurements (nominal, ordinal, interval, and ratio scale), how would you do so?

> How permanent do you think the postulates and principles underlying historical costing will be?

> The FASB and AICPA are considering the addition of “baby GAAP” for private companies. Take a position and argue why two GAAPs should or should not exist?

> The value of the firm is equal to the discounted value of the firm's free cash flows. Is it possible to forecast distant free cash flows? If not, what is the alternative?

> Why have management consulting operations created problems for the public accounting industry? How has SOX affected these problems?

> Is accounting theory really necessary for the making of accounting rules? Discuss.

> Every fall U.S. News and World Report comes out with a much awaited ranking of American colleges and universities (you may have even used it yourself). While there has been much criticism of the methodology that the magazine employs as well as some “fudg

> What are the implications of Young (2006) on the standards promulgated by standards setting bodies?

> Bradbury and Harrison (2015) study dissenting opinions in Financial Accounting Standards Board (FASB) standards. What changes, if any, do these opinions suggest need to be made in the conceptual framework?

> If different user groups do have different objectives, how might the situation be handled?

> Murphy, et al (2013) argue “living law” applies to conceptual frameworks. How does this perspective affect current frameworks?

> 1.Revenue recognition, when the right of return exists, was standardized in 1981 by SFAS No. 48. Prior to this, SOP 75-1 provided guidance but was not mandatory (which is why the FASB has brought various SOPs into the accounting standards themselves). As

> 1. Assume that an asset is being examined and it is determined that its cash flows would be $10,000 per year for four years (assume that all cash flows are received at the end of the year). The carrying value of the asset is $35,000 and its replacement c

> 1. What are the main distinctions between the Anglo-Saxon and the Continental models relative to accounting and financial reporting? Within the Anglo-Saxon group, how does the United States differ from other members of the group? What developments are le

> Should a CEO be evaluated based on one year's cash flows? Why or why not? (Your answer might be affected by your definition of cash flow.)

> How might the “capture” of auditors by auditees be mitigated?

> Evaluate the costs and benefits of the accounting standard-setting process (versus an unregulated environment).

> Liu and Espahbodi (2014) suggest that a firm’s dividend policy affects its propensity to smooth earnings. How might this finding affect financial statement analysis?

> Moehrle et al. (2010) respond to the FASB regarding possible financial statement presentation changes. Evaluate their response.

> The question of the usefulness of cost allocations (discretionary accruals and management compensation plans) has been introduced in this and previous chapters. What, if anything, would you do about (fixed) cost allocations? Don’t forget to consider poli

> Ball (2009) evokes the question of responsibility for the rash of accounting scandals in the 2000s. What actions do you propose to address the problem, if you agree that one exists?

> In July 2003, the SEC submitted to Congress its Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System. A year later, FASB issued its repl

> It might be said that we are slowly moving toward an asset-liability approach in the balance sheet. Which event situations support this statement?

> The IASB and FASB are pursuing a single, converged conceptual framework. The United States has a good start with SFAC No. 8. What additional changes should FASB make to further improve its conceptual framework?

> Why do we need international accounting standards? Why not simply let each country develop and use its own standards and let it go at that?

> Reexamine Exhibit 13.11. Explain the purpose of each performance measure. As a manager, which performance measure would you want to use. Which measure would you want used to evaluate you? Why? How would your decision change if your firm was experiencing

> To what extent should the liquidity measures revisions be considered if LIFO were to be eliminated from U.S. GAAP? Provide examples of those likely measures that would be affected. . As an interesting side note, what does the 2016 United States Budget es

> How do you think the efficient-markets hypothesis impacts the drafting of accounting standards? Bear in mind that many questions have been raised about the efficient markets hypothesis itself.

> Monsen (2001) proposes using cameral accounting to reduce the difficulties in preparing the Statement of Cash Flows using the direct method. Evaluate Monsen’s proposal from an implementation perspective.

> Broome (2004) recommends that the FASB should provide more guidance on classification of cash flows for the three sections. What guidance would you suggest?

> Why is the use of free cash flows increasing?

> What is cash flow? In your answer, be sure to reference the use to which it is put.

> Do you think that the indirect method of reporting cash flows from operations should be eliminated, allowing only the direct method in the SCFs? Discuss.

> 1. The usefulness of accounting data to investors and creditors for predictive purposes is necessarily forward looking. However, under generally accepted accounting principles, financial statements are constructed primarily as an historical record. Requi

> 1. A crucial question brought up in this chapter concerns the issue of whether the admittedly heterogeneous users of financial statements have highly diverse information needs in terms of their underlying objectives. State as carefully as you can (1) wh

> 1. Critique A Statement of Basic Accounting Postulates and Principles by a study group at the University of Illinois (it should be on reserve or otherwise made available to you). Your critique should cover, but not be restricted to, the following points:

> Why may interindustry income uniformity be more difficult to achieve than intraindustry uniformity, and what are the implications of this in terms of a conceptual framework project, specific accounting standards, and comparability of accounting income nu