Comprehensive Income: How Is It Being Reported And What Are Its Effects?

SFAS No. 130 allows three format choices for reporting comprehensive income (CI); two involve reporting CI in a performance-based financial statement, while the third option incorporates it into a statement of changes in stockholders' equity (SCSE).  Prior research suggests that reporting CI in the latter option results in less useful information for investors.  This study examines CI reporting for a sample of financial service firms and demonstrates that a majority (63%) of them chose a SCSE format.  In addition, a significant association existed between both the direction and size of the components of other comprehensive income and the format chosen.&nbsp

The Comparative Predictive Abilities Of Accrual Earnings And Cash Flows In Periods Of Economic Turbulence: The Case Of The IT Bubble

As set forth in SFAC No. 1, a primary objective of financial reporting is to provide information useful to decision makers. Predicting future cash flows represents a major goal of investors and creditors, and accrual and cash flow accounting information present two alternative factors useful in such predictions. The current research investigates the comparative abilities of accrual basis net income and historical cash flows from operations as predictors of future cash flows during both the economic boom leading up to the IT Bubble and the period of economic duress following the burst of that Bubble. Generally, results indicate that historical cash flows outperform accrual net income in predicting future cash flows during these periods of economic turbulence.  Additionally, the evidence reveals great variability in the predictive ability of accrual earnings during the time period studied, suggesting that accrual accounting estimates lose some of their precision during periods of extreme economic fluctuation

Big Bath Earnings Management: The Case Of Goodwill Impairment Under SFAS No. 142

The big bath theory of earnings management suggests that firms experiencing low earnings in a given year may take discretionary write downs to reduce even further the current period’s earnings.  The notion is that the company and its management will not be punished proportionately more for the big hit it takes to its already depressed earnings.  This “clearing of the decks” makes it easier to generate higher profits in later years.  SFAS No. 142, with its new requirement to test goodwill annually for impairment, provided a unique opportunity to test this big bath theory.  Examining Fortune 100 companies, this study presents compelling evidence that the big bath theory is more than just a theory but is instead a practiced method of managing earnings

Evolution of inflation accounting in the U.S.

This article presents a discussion of the development of the need for inflation accounting, the history of official pronouncements addressing inflation accounting, and a summary of research studies dealing with reporting the effects of changing prices. Not only does this analysis reveal the continuity, depth, and complexity of the issues facing the FASB, but it also facilitates an understanding of how and why the FASB determined that presentation of supplmentary price-level adjusted information should be voluntary

Do Gender Differences Exist In The Publication Productivity Of Accounting Faculty?

Prior studies on gender differences in the research output of accounting faculty have provided contradictory findings.  The current study examines the publication productivity of male and female associate professors of accounting at doctoral and nondoctoral granting institutions and shows that no gender effect exists in the publication output of faculty at nondoctoral institutions.  At doctoral institutions, however, men publish at greater rates than women in the top tier accounting journals and also in a broadened set of academic accounting journals.  No gender effect exists when the journal list is expanded to include academic and professional journals.  In addition, results show that a gender selection bias for coauthors occurs as men tend toward male coauthors and women gravitate toward female collaborators.  With women underrepresented at the associate professor level at doctoral institutions, this gender selection bias may put women at a disadvantage for finding suitable research partners, which could explain their lower publication productivity

Using Goodwill Impairment To Effect Earnings Management During SFAS No. 142s Year Of Adoption And Later

Prior research (Bens and Heltzer, 2004) shows that the market penalizes firms less for reporting goodwill write-downs below-the-line than it does for presenting them above-the-line.  Only in 2002, the year SFAS No. 142 became effective, did goodwill impairments enjoy below-the-line treatment.  The current research provides evidence that firms “cherry picked” this year to recognize large impairment losses, thus removing much of the burden from future years when these losses otherwise would have been reported above-the-line.  The study also indicates that, even though the number of firms taking goodwill write-offs declined subsequent to 2002, those entities that did so seemed to be taking these discretionary hits because earnings were already depressed in the current year.  As such, the big bath earnings management observed in the year of adoption in previous studies (Jordan and Clark, 2004 and 2005) appears to continue even though these impairment losses no longer receive favorable below-the-line treatment

John H. Gibbon, Jr., M.D.: surgical innovator, pioneer, and inspiration.

Throughout history there have been many discoveries that have changed the world, including Albert Einstein’s theory of relativity, Alexander Graham Bell’s telephone, and Jack Kilby and Robert Noyce’s microchip. There are a few analogous contributions that have been made in medicine: Sir Alexander’s discovery of penicillin, Lister’s principles of antiseptic technique, Salk and Sabin’s vaccines for polio, as well as numerous others. These innovative thinkers all had two factors in common. First, they were pioneers who faced problems that had no solutions at the time and who refused to accept the status quo in the face of great scrutiny and resistance. Second, their contributions would forever change the world. In 1930, a profound experience with a patient would forever change Dr. John H. Gibbon, Jr. and stimulate an idea to create a device that at the time sounded audacious and impossible. His device would temporarily take the role of both the heart and lungs to make repairs inside the heart or the great vessels. Twentythree years later, Dr. Gibbon used his machine to perform the first successful bypass-assisted open heart surgery