Interesting accounting change

JP Morgan sent around a report on a change in pension accounting at Honeywell last November.  Honeywell had been following the traditional procedure of amortizing any accumulated pension gains or losses that lay outside of the corridor over the average remaining service life of employees.  The company decided to stop amortizing – any gain or [...] Read more > >

Insights on Financial Reporting from the Managerial Accounting Section Mid-Year Meeting

Many papers have been written on the “kink” in the earnings distribution, which exhibits surprisingly few small negative realizations, and surprisingly many realizations at or just above zero.  Let the financial reporting researchers argue about whether the kink is statistically robust or whether it reflects earnings management (operational or otherwise).  Managerial accountants Indjejikian, Matejka, Merchant [...] Read more > >

Should a Scholar’s Motivation Be Relevant to How We Evaluate A Research Paper

Happy New Year!  I’m back to blogging after a holiday hiatus, with a pointer to this article addressing the title question.  The author, a law professor, says no.  I say yes.  If you think of evaluating a paper as an audit, knowing something about the author’s motivation is part of the inherent risk assessment, and [...] Read more > >

The IFRS Foundation Strategic Plan

We have a unique opportunity to (hopefully) have some impact on the future of standard setting. The IFRS Foundation oversees the International Accounting Standards Board. The Foundation has issued a call for comments on its strategy review. Click here to see comment letters received to date and instructions for submitting a comment letter. This provides [...] Read more > >

Attempted solution to liabilities case below.

I’ll take a crack at answering my own questions in the liabilities case posted on Dec. 9, 2010.  I hope there are some graders out there! Initially record cash and a liability. As corn is produced record an asset (corn inventory). At the end of each accounting period, mark the corn inventory to market and recognize [...] Read more > >

Liabilities

Yesterday’s roundtable recapping the FASB’s 2010 Financial Reporting Issues Conference got me thinking more about defining elements of financial statements, particularly a liability. I’m interested to know whether you can answer the following questions in a way that is consistent with your conception (or the FASB’s conception) of a liability. In any case, this (or [...] Read more > >

Round Table: Recap of 2010 Financial Reporting Issues Conference

Our next round table will be Wednesday, December 8, from 4-5 pm ET. In that session, we will be going over some of the topics and discussions from the 2010 FASB/IASB Financial Reporting Issues Conference, which will be held this weekend in Norwalk, CT. As discussed on the conference website, the objective of this year’s [...] Read more > >

Effective transitioning to new accounting standards

The FASB and IASB have at least four major projects expected to result in new accounting standards sometime next year: Fair Value Measurement, Financial Instruments, Leases, and Revenue Recognition. The user community is understandably interested in the effects that these standards will have on earnings and other information reported in 10-Ks and 10-Qs.  Users know [...] Read more > >

Add Research in Accounting Regulation To Your Reading List

Are you familiar with Research in Accounting Regulation, an Elsevier Journal?  Editor-in-Chief Gary Previts and Manuscript Editor Stephen Moehrle have put together an issue worth looking at.  The lead article by Holhbeck and Warfield analyzes the attributes of recent accounting standards, and Greg Jonas, along with Stephen Moehrle and Jennifer Reynolds-Moehrle summarize academic research published [...] Read more > >

How to Read and Write

Twin goals of FASRI are helping researchers to understand standard setters and to communicate complex research findings in a way the standard setters can understand.  Part of the challenge is knowing how to read and write.  Here is a bit of advice on each one. How to Read. There is an old Jewish saying: According [...] Read more > >

Who knows?

A colleague of mine and I are not on the same page as to what happens in the following case — who can help us? BONDS callable by the holders … a call window is coming up in the next year. Interest rates are down so unlikely to be put back to the company by [...] Read more > >

Fair Value and Feedback Effects: Roundtable with Rich Frankel

UPDATE:  AUDIO FOR THE SESSION IS HERE. Our next FASRI roundtable is scheduled for 4pm-5pm ET Wednesday, November 17th.  Richard Frankel (Washington University) will be joining us to talk about his recent paper, Panacea, Pandora’s Box, or Placebo: Feedback in Bank Mortgage-based Security Holdings and Fair Value Accounting.  The paper continues several themes that FASRI [...] Read more > >

Additional political economy research

I really enjoyed the Political Economy roundtable last week hosted by Jeremy Bertomeu and Bob Magee (audio is available if you missed the session).  I am unsure if I understand all of the moving parts in the analytic model, but many of the parts make intuitive sense.  The insight that popular opinion about the quality [...] Read more > >

“Scoping out” a conceptual framework

Over the course of my career, I have to admit that I’ve paid little attention to the scope paragrahs of financial accounting standards. Lately, I’ve been thinking that this might be the best place to look for a conceptual framework. In other words, how broad a (principles-based) framework would we need to alleviate the need for [...] Read more > >

A goodwill teaching moment…

For anyone who teaches M&A material in their classes, this is a great article just written by Jonathan Weil. Bank of American paid a lot for Countrywide. There was a massive amount of goodwill in that transaction. However, while everything else is in the dumps, the goodwill still lingers in an untouched state. Wow, this [...] Read more > >

Audio on Political Economy Discussion

The audio recording of our discussion on the political economy of standard setting is available here.  At the end, I emphasized that there are some opportunities for empirical work, and the benefit of theory is to provide a framework for knowing what data to collect and how to interpret it. To see the possibilities, take [...] Read more > >

SEC Issues its First Progress Report on the IFRS Work Plan

As announced on Oct 29, 2010, the SEC released its first progress report on the Work Plan which will lead up to the Commission’s decision in 2011 on whether and how to incorporate IFRS into the US financial reporting system. Much of the progress report is dedicated to explaining what the SEC staff is doing [...] Read more > >

Why did they do that II

Lisa Koonce asked a question about a particular company’s accounting the other day.  Now it is my turn.  As you probably heard, Apple early adopted some new revenue guidance that allows them to recognize the bulk of IPhone revenue at delivery rather than over the subsequent 24 months.  The early adoption required retrospective adoption, so [...] Read more > >

Good students are worth their weight in GOLD

One of my current “traditional” masters students in accounting (traditional = comes in for a one-year degree only, having gotten a bachelors degree elsewhere) is a 35 year old fellow with a law degree from U of Iowa… worked at the bankruptcy court in St. Louis. Really bright fellow who looked like he thought he’d [...] Read more > >

Roundtable: Political Economy of Standard Setting

UPDATE:  The Audio for the discussion is available here. One reason I was sad to miss this year’s JAE conference was that I didn’t have the chance to hear comments on “From Low-Quality Accounting to Financial Crises:  Politics of Disclosure Regulation Along the Economic Cycle“, by Jeremy Bertomeu and Bob Magee. From the abstract: This [...] Read more > >