Question: Why does accounting information have some features

> How has ERISA affected pension accounting?

> Why is there a “double counting” problem if the accumulated benefit obligation is used to measure the pension liability and what can be done about it?

> Explain how previous pension accounting standards were based on a revenue-expense approach to the financial statements.

> Is it inconsistent to use future salaries for service cost calculations and current salaries for minimum liability calculation purposes?

> What differences exist, relative to the use of future costs and future salaries, in the case of OPEBs (SFAS No. 106) and pensions (SFAS No. 87)?

> Why may companies not be indifferent to purchase and pooling accounting, and what do we know about this issue from research studies?

> How did the “give-and-take” differ between the FASB and its constituents in the drafting of SFAS No. 87 on pensions versus SFAS No. 106?

> What types of economic consequences may arise from accrual accounting for OPEBs in SFAS No. 106?

> What considerations may have motivated the FASB to grant a four-year transitional period in capitalizing pre-1977 leases meeting the capitalization tests of SFAS No. 13? What other political behavior is evident in the evolution of lease accounting?

> Research has shown that discount rates used by firms are generally above rates suggested by the FASB. Will this make the interest cost portion of pension expense higher or lower than if discount rates were lower? Why do you think firms favor using a high

> Evaluate the manner in which initial direct lease costs are accounted for under SFAS No. 13.

> What is the disappearing asset problem?

> Why does SFAS No. 52 provide an example of finite uniformity in terms of the use of remeasurement?

> Why would balance sheets prepared under SFAS No. 8 lack additivity?

> How do accounting exposure and economic exposure differ?

> What are the differences between a foreign currency orientation and a U.S. dollar orientation regarding the translation of foreign currency operations?

> What do the following actuarial terms mean: accumulated benefits, actuarial liability, vested benefits, service cost, and unfunded accumulated benefits? How are they measured? How are projected benefit obligations, accumulated benefit obligations, and ve

> What are the main issues surrounding the special purpose entity and its successor, the variable interest entity.

> Current discussions by the Boards point to a possibility that a converged standard on leases will not be achieved. How will lack of converged standard on leases affect the Boards’ Joint Project?

> According to The Wall Street Journal article on February 1, 1996 (“Intrinsic Value” by Roger Lowenstein, p. C1), pension fund assets in the United States grew dramatically—by approximately 29 percent—during 1995, an excellent year in the stock market. Ho

> Distinguish among sell-offs, spin-offs, split-offs, and split-ups.

> If actuarial gains and losses and prior service costs, in line with SFAS No. 158, are to be recognized in the period when incurred, is there a double counting effect when these elements are recognized as part of net pension expense?

> Voluntary pension plan terminations have been increasing [see Stone (1987)] in which surplus plan assets are recaptured by sponsoring companies after deferred annuities (of equivalent value to accrued benefits) are purchased for plan participants. Why do

> What is push-down accounting? What problems would arise in connection with the implementation?

> Does the reporting of capital leases appear to have value to users of financial statements? Why are there costs of reporting capital leases?

> Why does the FASB’s reporting entity project logically precede any conclusion regarding consolidated financial reporting?

> Discuss the limitations of consolidated financial statements and why dual reporting (consolidated and separate entity statements) as well as other forms of disaggregated reporting, such as SFAS No. 131, make sense.

> What is the argument for finite uniformity in accounting for leases? Why is finite uniformity difficult to achieve? Explain what the relevant circumstances are in accounting for different types of leases.

> What is the difference between owners’ equity accounts representing shareholders’ claims as equity holders versus shareholders’ interests as owners?

> Is there a similarity between the codificational approach (Gaa) to standard setting and the jurisprudential approach?

> How does feedback value relate to predictive ability and accountability?

> Of what importance in a conceptual framework or metatheory are definitions of such basic terms as assets, liabilities, revenues, and expenses?

> Does the entity theory or the proprietary theory provide a better description of the relationship existing between the large modern corporation and its owners?

> How does agency theory (Chapters 2 and 4) differ from the equity theories discussed in this chapter?

> Who pays for accounting regulation and who benefits?

> Why do you think the equity theories are less important today than they were, say, 50 years ago?

> In 1936 the United States was still suffering from the Great Depression. During the presidential election campaign, an extensive survey of voter attitudes was undertaken to find out whether the public preferred the incumbent, Franklin Delano Roosevelt, o

> Why is the residual equity theory more in line with recent research in finance than entity and proprietary theory?

> “Assuming all other things equal, it is possible that the lower-of-cost-or-market method can result in any given year in higher income than would be the case under the same inventory costing method without the use of lower-of-cost-or-market. If so, then

> “Since the FASB is independent from the AICPA, the latter is no longer concerned with standard setting and related issues.” Evaluate this statement.

> What is Pareto optimality? Why would adherence to it minimize accounting standard setting?

> What benefit is the conceptual framework project to the FASB if (a) there is no way of determining optimal accounting regulation and (b) regulatory decision making is a political process?

> Of the nine so-called principles shown in Exhibit 5-1, which do you think are the most important in terms of establishing a historical costing system?

> Why has the entity theory fragmented into two separate conceptions?

> Do you think the “broad principles” of ARS 3 are really principles as that term is used in science?

> Arrow (1963) warns that public participation and a consensual approach to social issues can lead to democratic paralysis; that is, to a failure to act due to an inability to agree on goals or objectives. How did such a situation lead to the demise of the

> Can accounting standards and policy making be neutral? In what sense is neutrality really important?

> A distinction was made in the chapter between two types of regulation: (a) the refinement and standardization of financial statements and (b) expanded disclosure. Why is the distinction important in evaluating the regulation question?

> Why can’t optimal regulation be determined? If optimal accounting regulation cannot be determined, how can a regulatory body such as the SEC or FASB make good decisions?

> 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?

> What type of measurement scale (nominal, ordinal, interval, or ratio scale) is being used in the following situations? a. Musical scales b. Insurance risk classes for automobile insurance c. Numbering of pages in a book d. A grocery scale e. A grocery sc

> 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