Assessing the Impact of Transition from Rules-based to Principles-based Accounting in the Recognition of Revenue: A Study of Public Companies listed in the Russell 3000 Index that Elected the Full Retrospective Method of Accounting

This research empirically assesses the impact on the financial statements for businesses listed on the Russell 3000 Index after the transition to FASB ASC Topic 606: Revenue from Contract with Customers. The study was focused on the 272 companies that elected the Full Retrospective Method of accounting after transition from rules-based accounting to principles-based accounting. The research applied Gray Comparability Index and Student t-Test to determine the significance of the difference between the ex ante and ex post revenues reported in the Form 10K filed with the Securities Exchange Commission. The companies were divided into all adopters, early-adopters, and non-early adopters to assess their impact on the financial statements. The results indicated that there was no statistical or material difference for all the participants (all adopters) investigated. The results also indicated that there was no statistical or material difference for early-adopters and non-early adopters. Additional results by industry segments indicated that the difference in revenues for health care was statistically significant and material. The impact on the financial statements for the rest of the industries were not material or statistically significant. The results provided answer to the research question that there is no difference between the before and after revenues in the financial statements after the transition to principles-based accounting in the United States for companies tracked by the Russell 3000 Index. This research brings to the awareness of stakeholders the impact on the financial statement after the transition from rules-based to principles-based accounting in the implementation of the new revenue recognition standard in the United States. The findings in this study have implications to the FASB, IASB, professional accounting firms, management, and investors as they look forward towards the ongoing convergence between US GAAP and IFRS on other accounting standards not related to revenue

Expanding The Accounting Education Horizon: Sensitizing Students To The Professions Societal Obligations

This paper presents an alternative teaching pedagogy that goes beyond the learning of complex rules to provide accounting students with a better appreciation for their profession’s societal obligations.  The proposed pedagogy presents students with the evolution of accounting standards in a given topical area, and challenges them to evaluate the extent to which the different stages of evolution succeeded in meeting the profession’s obligations to society.  These obligations are defined in terms of the financial reporting objectives set forth in the Concepts Statements of the Financial Accounting Standards Board.  The proposed pedagogy is offered as a means of addressing problems with respect to the more conventional “memorize these rules” method of accounting instruction.  Our aim is to develop students who take a greater interest in the standard setting process and in fulfilling its promise of meeting the financial reporting needs of society

Toward The Goal Of Teaching Excellence In Accounting: Reexamining The Role Of Neutrality And Conservatism In The Development Of Pension Accounting Standards

Pension accounting is replete with complexities that present difficulties to even the most seasoned accounting practitioners.  It thus represents one of the more problematic areas of the accounting curriculum for accounting students and instructors alike.  Traditional approaches toward the teaching of pension accounting rely heavily on memorization techniques that tend to serve students’ needs on a short-term basis.  The authors present an alternative approach to instruction in which students assume the role of accounting standard setters and seek to develop pension accounting rules that favor corporate interests.  This approach allows students to recognize the economic consequences that standard setters sometimes consider in their promulgation of accounting and financial reporting rules.  The result is that students acquire a greater depth and breadth of understanding of pension accounting rules and why those rules exist as they do.  They also acquire a keener understanding of the broader standard setting process.  This logic-based approach is likely to better serve the long-term needs of our future accounting professionals

A game theory approach to research on lobbying activities in accounting regulation: benefits and issues

working paperThere is a lack of consensus on the most appropriate methodological framework for studies of regulation and due process in order to provide robust outcomes and predictive potential. In addition to this diversity of approaches, research typically adopts a "single-event focus" to an examination of due process and regulatory efficiency. The objective of this research is to examine the advantages and issues arising when methodologies offering a multi-event approach are adopted specifically the utility of game theory methodology in accounting lobbying research. The applications of game theory in previous studies in accounting research are summarised (the application to FASB voting rules, auditor-client interaction, and accounting disclosure choices relevant to wage bargaining) and the theoretical basis for studies of lobbying behaviour is also reviewed. The standard model as currently utilised in research on lobbying activities is described, and an alternative dynamic model proposed. Four core issues arise in the application of such a dynamic model: identification of the master game and sub-games, gradual or punctuated equilibrium, agency issues, and reputation effects. It is apparent from the application of game theory in other areas of accounting research that evolutionary game theory offers a more comprehensive and dynamic model of real-world events, based on multi-period or sequential events. The proposed utility of a game theoretic model in accounting research on due process and regulation justifies further developments in this area

A Game Theory Approach to Research on Lobbying Activities in Accounting Regulation: Benefits and Issues

There is a lack of consensus on the most appropriate methodological framework for studies of regulation and due process in order to provide robust outcomes and predictive potential. In addition to this diversity of approaches, research typically adopts a “singleevent focus” to an examination of due process and regulatory efficiency. The objective of this research is to examine the advantages and issues arising when methodologies offering a multievent approach are adopted; specifically the utility of game theory methodology in accounting lobbying research. The applications of game theory in previous studies in accounting research are summarised (the application to FASB voting rules, auditorclient interaction, and accounting disclosure choices relevant to wage bargaining); and the theoretical basis for studies of lobbying behaviour is also reviewed. The standard model as currently utilised in research on lobbying activities is described; and an alternative dynamic model proposed. Four core issues arise in the application of such a dynamic model: identification of the master game and subgames; gradual or punctuated equilibrium; agency issues; and reputation effects. It is apparent from the application of game theory in other areas of accounting research, that evolutionary game theory offers a more comprehensive and dynamic model of realworld events, based on multiperiod or sequential events. The proposed utility of a game theoretic model in accounting research on due process and regulation justifies further developments in this area

The Auditor as Standard-setter – some US evidence and its implications

Cette étude fournit des exemples détaillés dans le cadre du GAAP américain de l'arrivée au niveau des préparateurs et des réviseurs de nouveaux réglements promulgués. Nous montrons que les réviseurs créent leur propre ‘sous-réglement' détaillé qu'ils imposent a leurs clients par la suite. Nous suggérons que de telles activitées pourraient être : • Hors de tout jugement « en bonne et due forme » et donc ne répondant pas aux exigences de la légitimité institutionnelle • Imposant la forme légaliste sur le contenu économique • Incompatible avec ce qui sont sensés être les exigences supérieures dans la hiérarchie du GAAP américain • Contradictoire avec la reconnaisance du FASB que la sélection des politiques convenables de comptabilité reste la responsabilité des préparateurs. • Soutenues par le FASB en dépit de la liste dressée ci-dessus, Nous généralisons les implications de ces déviances dans le contexte de l'harmonisation internationale puis nous suggérons que les réglements imposés par les auditeurs sont incompatibles avec une présentation juste des « économies implicites », bien que l'application et l'interprétation du GAAP promulguées au niveau de l'entreprise par le réviseur et le préprateur soient essentiels. Le soutien apparent , ou du moins l'acceptation, du FASB pour de tels réglements est problématique. Nous proposons ici des raisons pour lesquelles l'approche du FASB/SEC pourrait être condamnée si une plainte était déposée devant un tribunal américain. Les exemples de minutiae légaliste nécessaire que nous examinons sont incompatibles avec les exigences et la philosophie des Normes de Comptabilité Internationales, ce qui provoque des inquiétudes au sujet du processus de convergence des exigences de l'IASB et de la FASB.Légitimité institutionnelle; contenu prévalant sur la forme ; auditeur GAAP

Accounting For Defined Benefit Pension Plans: Is FASB Finally Fulfilling Its 25 Year Old Promise?

With the September 2006 release of Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” the Financial Accounting Standards Board (FASB) has completed the first phase of its ongoing pension accounting project.  The new standard improves the accounting for defined benefit pensions by requiring employers to report the over(under)funded status of their plans as an asset(liability) within the main body of their balance sheet. This requirement represents a significant change from previously-existing pension accounting standards, and represents a major step forward toward the goal of increased transparency in financial reporting.  This article provides a discussion of the very lengthy and controversial history of employer pension accounting, and examines the improvements that have finally resulted from Statement No. 158. Also provided is a discussion of the potential outcome of the second and final phase of the FASB’s pension accounting projec