An empirical examination of materiality by factor analysis and cognitive mapping of user and preparer groups

This research primarily has attempted to determine if user-decision perspective (banker) and preparer perspective (CPA) differed in their materiality decisions and materiality cognitive processes. As its second objective the research has sought to determine the factors used in materiality judgments. The researcher collected the data for the study while attending graduate and undergraduate classes of the American Banking Association\u27s National Commercial Lending School and a training session of a Big Six accounting firm. Factor analysis of the data determined the underlying dimensions of materiality decisions. The accountants identified three relevant sets of factors: ratios, sensitive areas, and unrecorded items; the bankers identified absolute dollar amounts, ratios, and characteristics of the event. The results of factor analyses agreed with prior observations by the FASB and others that materiality has both qualitative and quantitative dimensions. MANOVA compared the materiality decisions of CPAs with those of bankers. Profession had a very significant effect on materiality decisions, while experience proved only marginally significant. With only one exception, bankers assigned more materiality to each decision than did accountants, and those with more experience considered every case more material than did those with lower experience levels. This study included an exploratory research effort to explain how the materiality cognitive processes of users differed from those of preparers. The participants provided conceptual maps (spatial representations of the organization of central ideas) of their materiality cognitive process. MANOVA compared the materiality cognitive process of CPAs with that of bankers. Profession had a significant effect on the materiality cognitive process, while experience did not have a significant effect. In general, accountants had larger, more developed, and more categorized cognitive maps for materiality decisions than did the bankers. Accountants emphasized those items relating to the business environment and the event or judgment, while bankers emphasized those items concerned with the firm, accounting system, and source of information

FASB/GASB Recognition and Reporting Differences: A Nonprofit Sector Perspective

The financial statement users’, investors’, donors’ and academic researchers’ understanding of current accounting recognition and reporting guidance affect their ability to compare financial information issued by nonprofit universities, hospitals, fund-raising organizations and government agencies. The financial results reported by public nonprofit organizations is different from that reported by private nonprofit organizations. This study discusses the events that brought about the divergence in nonprofit financial accounting recognition and reporting,and illustrates specific differences

Recognizing Intellectual Capital As An Asset

The revised definition of an asset by the FASB and GASB gives way to the recognition of the fair value of another off-balance sheet value. Interest in recognizing intellectual capital as an asset of the organization has grown out of dissatisfaction with traditional financial accounting and reporting directed toward manufacturing, trading of goods, and service activities which ignore the organizational asset values based on knowledge, expertise and technology. The growing interest in intellectual capital (IC) and knowledge management reflects an awareness of the need for identification, utilization, and measurement of an organization’s most valuable asset. This paper identifies the importance of the IC value, discusses the research emphasis placed on it by others, and develops a fair value measurement model. The model provides a basis not only for identifying crucial aspects of effective knowledge management, but also for emphasizing the interdependence, and the synergy that may be created through recognition. Measurement techniques are presented together with a process for stakeholder communication that establishes the groundwork for future empirical investigation and analysis

Special Business Entity Reporting: One Plugged Hole is better than none

This discussion includes an overview of special business entities and their status and outlines legitimate uses. It also illustrates what can and has happened, when individuals who lack integrity direct special business entities. Problems are identified that can arise when special business entities are not used as they were intended, namely, inaccurate financial reporting. The company in the illustration walked the line between legal and illegal, but was past the line of what was morally right, and in the shareholder’s best interest. The discussion concludes with an accounting solution for the special business entity problems

Recognizing Intellectual Capital As An Asset

The revised definition of an asset by the FASB and GASB gives way to the recognition of the fair value of another off-balance sheet value. Interest in recognizing intellectual capital as an asset of the organization has grown out of dissatisfaction with traditional financial accounting and reporting directed toward manufacturing, trading of goods, and service activities which ignore the organizational asset values based on knowledge, expertise and technology. The growing interest in intellectual capital (IC) and knowledge management reflects an awareness of the need for identification, utilization, and measurement of an organization’s most valuable asset. This paper identifies the importance of the IC value, discusses the research emphasis placed on it by others, and develops a fair value measurement model. The model provides a basis not only for identifying crucial aspects of effective knowledge management, but also for emphasizing the interdependence, and the synergy that may be created through recognition. Measurement techniques are presented together with a process for stakeholder communication that establishes the groundwork for future empirical investigation and analysis

Accounting for Agricultural Products: US Versus IFRS GAAP

Currently there is a mix of accounting guidance for agriculture producers in the US that is both GAAP including Accounting Statement Codification 905 and non-GAAP financial guidelines. Should the US adopt International Financial Reporting Standards (IFRS), this guidance would be replaced with International Accounting Standard (IAS) 41 – Agriculture. This study identifies systematic differences between the US and International accounting and reporting for agricultural assets and products. The study also finds that international and US agricultural accounting recognition and reporting guidance result in dissimilar reporting due to guidance interpretation. Valuation variances and definition differences including the requirement to change the agricultural asset recognition method from historical cost to fair value continue to be the basis of major reporting differences. Current US guidance on recognizing and reporting agricultural assets is more conservative than the international guidance. Overall, the US agricultural recognition and reporting guidance contains less information and is therefore less beneficial to financial statement users

Local County Hospital: A Review of Challenges and Opportunities

There are multiple factors regarding current health care delivery in the U.S. These factors include the high-priced medical care, hospitals, equipment, and pharmaceutical charges, and the private system of health insurance. This discussion looks at these factors’ impact on Local County Hospital ranging from Obamacare to a host of other challenges. The hospital is going through difficult times as it struggles to make ends meet. Although it will take time to adjust to an inconsistent environment and changing health care industry, Local County Hospital continues to focus on the patients first and attempts to keep the region healthy

Determinants of State Audit Delay: An Empirical Analysis

Prior audit delay studies concentrated on municipal government, counties and school districts. This study adds to the literature by examining the determinants of state governments’ timeliness of audit reports. Audit delay determinants found by previous municipal research are used to identify characteristics that may influence state audit delay. This study’s results suggest both agreement and contradiction of prior research audit delay determinants. Financial variables alone do not predict state government audit delay. However, a combination of financial and nonfinancial variables used in municipal audit delay studies do