Why are interest rate swaps a zero sum game?
> Why have mutually unperformed executory contracts traditionally been excluded from financial statements? Can this practice be justified in terms of asset and liability definitions? How relevant is this approach for professional sports franchises?
> Do you see any inconsistency in SFAC No. 1, which sees financial statements as general purpose but geared primarily toward investors and creditors?
> Discuss the bright line that does or does not distinguish debt and equity classifications.
> Would changing the asset definition in the conceptual framework to one concerned with property rights have any other ramifications? Discuss.
> Four postulates (going concern, time period, accounting entity, and monetary unit) were discussed as part of the basic concepts underlying historical costing. Can any of the principles discussed under the same general category be deduced or logically der
> Horngren (1973) argues that accounting policies are a social decision and a matter of public interest. Evaluate this statement.
> What does harmonization of accounting standards mean?
> Why does segment disclosure in SFAS No. 131 represent a potential improvement over segment disclosure in SFAS No. 14?
> Why does it make sense to define materiality from the user’s perspective?
> Of the following decision-model advocates discussed in the chapter (Chambers Sterling, Solomons, Bell, and Ijiri), which one stands out as most unlike the others?
> Do you think that disclosures of smaller firms have more information content than disclosures for larger firms?
> Research, while inconclusive, has shown that earnings are manipulated downward prior to a management buyout. What is the logic of this and why do management buyouts present a difficult agency theory problem?
> What is clean surplus accounting? What is its role in linking dividends and abnormal earnings?
> Do you agree that it is not necessary to provide information for undiversified investors? Discuss.
> How did the APB pave the way for the FASB?
> How does EVA differ from economic profit?
> What is the weakness of Grady’s approach in arriving at principles in ARS 7?
> Who are creditors?
> What is an event study?
> How does conventional retained earnings differ from entity equity under the Anthony conception of the entity theory?
> Accounting earnings are useful in predicting one-year ahead cash flows. Is this sufficient? Why or why not?
> Verifiability is part of reliability in SFAC No. 2, but is now an enhancing qualitative characteristic in SFAC No. 8. What effect does this reclassification have on the importance of verifiability in the framework?
> Why might the distinction between revenues and gains, and between expenses and losses, be important to report yet unimportant as to how they are reported?
> What inconsistencies does Merino see in the proprietary theory at the turn of the twentieth century before the advent of entity theory?
> What is the relationship between the National Commission on Fraudulent Financial Reporting and Private Securities Litigation Reform Act of 1995?
> Why do you think the term “deprival value” was used to name a specific type of replacement cost?
> Why do you think that security prices are impacted more by “bad news” than “good news”?
> How do the imperative postulates (group C) differ from the other two categories of postulates?
> A study (discussed in the chapter) found a heavier emphasis placed on relevance rather than reliability in disclosure standards by the FASB. Why do you think this is the case?
> Postulates are supposed to be tight enough to prevent conflicting conclusions being deduced from them. Is this the case with ARS 1?
> Why is earnings-per-share calculation an example of the residual equity of a firm being broader than merely its current common shareholders?
> Why does post-earnings-announcement drift challenge the efficient-markets hypothesis?
> The “uncertainty principle” of the famous physicist, Werner Heisenberg, states that physical phenomena cannot be precisely measured because the very act of measuring affects the phenomenon being measured. Which of the directions of accounting research di
> There has been a trend toward rigid uniformity in the format of the income statement. Explain how and why this has occurred.
> What is the relationship between public goods and free riders? Is accounting a public good?
> How do market-level and individual decision-maker analyses complement one another in studying the usefulness of accounting information to investors and creditors?
> Why is it argued that capital market research cannot determine the optimality of accounting policies even for the limited investor-creditor group?
> What is the difference between “accounting theory” and “accounting research?
> What is the difference between joint and severable liability and proportionate liability?
> The social goals underlying accounting regulation are information symmetry and comparability. Why are these goals complementary?
> Why does codification presume a democratic setting?
> What is the relationship among scientific method, accounting research, and accounting policy making?
> Why, in practical terms, is it impossible to separate deductive and inductive approaches to theoretical reasoning?
> In SFAS No. 154, changes in accounting principle result in a restatement, whereas under APB Opinion No. 20, a change in accounting principle is handled in a pro forma manner. How does a restatement differ from a pro forma presentation?
> What advantages do you see for classifying interest expense as an investing cash flow rather than an operating cash flow? What is the advantage of classifying it as an operating cash flow? What is the advantage of classifying it as a financing cash flow?
> Why are convertible bonds and convertible preferred stock not examples of embedded derivatives?
> Should incentive and nonqualified stock options be treated the same on the financials?
> Evaluate the attempt by the FASB to separate stock options from stock appreciation rights that are payable in cash?
> Distinguish between the discrete and integral views of quarterly information disclosure.
> Which factor discussed under future events is the most important and why?
> Why are future events so important to the issue of revenue and expense measurement?
> Why is the handling of troubled debt restructuring under SFAS No. 114 illogical?
> Is earnings per share an example of finite or rigid uniformity?
> Why does the concept of market efficiency (with respect to information) have no necessary relation to the quality of accounting information? Why is this distinction important with respect to accounting policy making?
> Numerous attributes are measured in the balance sheet. What are the different attributes? Why is this practice criticized?
> What does it mean to classify a cash flow according to the basic nature or function of the event as opposed to the ultimate purpose of the transaction? Which method do you prefer?
> What do research findings indicate concerning the relevance of cash and funds flow data?
> Why is the SCF called a derivative statement?
> What is the purpose of reporting noncash items in the SCF?
> How does the source/use classification reflect the structure of double-entry accounting?
> Why is the three-way classification system in the SCF more informative than the two way source/use classification?
> What attribute is being measured in the SCF and how well is representational faithfulness achieved? Compare this to when funds are defined as working capital.
> What is the “quality of income” concept, and how does cash flow reporting relate to it?
> Explain how cash flow data complement the income statement and balance sheet.
> What types of costs present matching problems, how are they dealt with, and what are some examples of such costs?
> What is the “fineness” issue raised by Nurnberg and Largay relative to accounting for hedging transactions in SFAS No. 104?
> Does the “fineness” issue arise relative to the handling of capitalized interest costs (SFAS No. 34) relative to the treatment of this item in SFAS No. 95? Explain.
> Why is it that postulates stemming from the economic and political climates as well as the customs and viewpoints of the business community would not serve as a good foundation for deducing a set of accounting principles?
> SFAS No. 95 allows a choice between the direct and the indirect method for calculating the operations section of the SCF. Do you think this is a case of flexibility? Explain.
> How did the all-inclusive or all-resources approach to the SCFP with funds defined as working capital differ from the older funds flow statement?
> What are the different conceptions of the true and fair view?
> What is the matching concept and why is there an implied hierarchy for expense recognition?
> From the standpoint of management, are there any differences between attempting to control bad debt expense percentages and research and development expenses?
> How does the asset impairment measurement approach of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, compare to deprival value?
> Why is there an implicit recognition of fair value in the 1984 Revised Model Business Corporation Act?
> Is the revenue-expense orientation consistent with fair value measurement?
> Four points in the revenue cycle, from production through to cash collection, are possible events for revenue recognition. What relevant circumstances would justify finite uniformity rather than rigid uniformity for revenue recognition, and which approac
> SFAS No. 133 (213 pages), 149 (78 pages), and 155 (27 pages) define standards for derivatives in 318 pages. How would a principles-based approach to setting standards affect their length…or would it have any effect?
> What is the relationship between earnings management and income smoothing?
> What are deferred charges and deferred credits, how do they come about, and do they conform to asset and liability definitions?
> What is the meaning of “owners’ equity” in the balance sheet? Why are certain unrealized gai or losses included in owners’ equity?
> Why has no Continental model country developed a conceptual framework?
> Why are asset and liability definitions important to the theoretical structure of accounting? Why are definitions important to policy setting bodies?
> Traditional measures of net assets do not capture the value of human capital in an organization. Which trends, if any, suggest that intellectual capital may eventually be a candidate for inclusion as an intangible on the balance sheet?
> Lee (2001) rejects the “naive view” of market efficiency. Explain. If Lee is correct, what are the implications for capital markets research in accounting?
> What is a securitization and why do firm’s use this technique?
> How do Lev’s views on disclosure differ from the views of Brownlee and Young?
> What are the characteristics of assets, liabilities, and owners’ equity, and how have they evolved over time?
> Why is it difficult to define the basic accounting elements?
> Based on your reading of this chapter, plus your general knowledge of accounting standards, identify five examples of measurement flexibility in the statement of financial position.
> Is the “available for sale” category for debt and equity securities used in SFAS No. 115 a homogeneous category?
> As Schipper seets it, why do the rules based and principles based approaches to standard setting tend to converge?
> Evaluate the IASB’s approach to convergence.
> How does the role of government differ in the United Kingdom and the United States relative to financial reporting?
> What are the main distinctions between the Anglo-Saxon and the continental models?
> What is the relationship between the IFAC and IASB?
> Compare the true and fair view of the United Kingdom, the “present fairly” outlook of the United States, and the legalistic view of the Continental model.
> The EU opted to use exclusively IASB standards for consolidated financial statements beginning in 2005. What drove this decision?
> What do we mean when we say that capital market research involves a joint test of both market efficiency and the model used to estimate abnormal returns?
> For event studies, the post event window is typically short (days or months). What are some issues associated with examining longer event windows (e.g., years)?
