Accounting Theory Conceptual Issues In A Political And Economic Environment 6th Edition Harry I. Wolk, James Dodd, Michael G. Tearney - Solutions

=+rights definition of accounting. Do you think that SFAS No. 2 requiring immediate expensing of research and development costs is an example
=+16. Samuelson has stated (discussed in the chapter) that the FASB's asset definition is grounded in future benefits or cash flows which leads, in his opinion, to an emphasis on matching rather than on a property
=+Why do you think this is the case?
=+15. A study (discussed in the chapter) found a heavier emphasis placed on relevance rather than reliability in disclosure standards by the FASB.
=+14. Conservatism is discussed in paragraphs 91-97 of SFAC No. 2. Why is its role in SFAC No. 2 rather ambiguous?
=+13. Verifiability is part of reliability in SFAC No. 2. How does verifiability dif-fer from the older concept of objectivity and which do you think is more restrictive?
=+12. Is there a similarity between the codificational approach (Gaa) to stan-dard setting and the jurisprudential approach?
=+11. How does feedback value relate to predictive ability and accountability?
=+10. Very carefully explain why conflicts can exist between prediction of cash flows and accountability.
=+9. SPAC No. 6 is largely a repetition of SFAC No. 3. Discuss two possible rea-sons why this repetition occurred.
=+8. Is neutrality inconsistent with the external user primary orientation of SFAC No. I and the pervasive constraint (benefits > Costs) of SFAC No. 22
=+7. What is comprehensive income?
=+6. How does earnings as discussed in SFAC No. 5 differ from net income?
=+5. In examining recognition and measurement, Sterling believes that measurement should precede recognition whereas Archer believes that it is "logical" for recognition to precede measurement. Do you think that Sterling or Archer is correct? Explain.
=+4. How does the freedom from bias mentioned in ASOBAT compare to the quality of neutrality mentioned in SFAC No. 2?
=+3. Why must objectives be at the topmost level of a conceptual framework of accounting?
=+2. What is the relationship between the economic consequences of accounting standards discussed in Chapter 4 and the quality of neutral-ity presented in SFAC No. 27
=+1. Of what importance in a conceptual framework or metatheory are def-initions of such basic terms as assets, liabilities, revenues, and expenses?
=+2. Four points in the revenue cycle, from production through to cash collection, are possible events for revenue recognition. What relevant
=+circumstances would justify finite uniformity rather than rigid unifor-mity for revenue recognition, and which approach is used in practice?
=+8. Research, while inconclusive, has shown that earnings are manipulated downward prior to a management buyout. What is the logic of this and
=+why do management buyouts present a difficult agency theory problem?
=+11. Why is "less" really "more" with SFAS No. 128 on earnings per share?
=+12. Describe the incentives that might motivate income smoothing, and the ways it could be done.
=+13. Why is income smoothing difficult to research, and what are the research findings to date?
=+15. What is the relationship between earnings management and income smoothing?
=+16. Is earnings per share an example of finite or rigid uniformity?
=+17. Why is the handling of troubled debt restructuring under SFAS No. 114 illogical?
=+18. Why are future events so important to the issue of revenue and expense measurement?
=+19. Which factor discussed under future events is the most important and why?
=+21. Why do you think earnings is managed when it appears that actual income might be less than management's voluntary forecasts of earnings?
=+22. Is the FASB correct in attempting to separate stock options from stock appreciation rights that are payable in cash?
=+23. Should incentive and nonqualified stock options be treated the same on the financials?
=+2.1. What is the purpose of pro forma earnings and why does it present a problem?
=+1. Revenue recognition, when the right of return exists, was standardized in 1981 by SEAS No. 48. Prior to this, SOP 75-1 provided guidance but was not mandatory (which is why the FASB has brought various SO/'s into the accounting standards themselves). As a result, three methods were widely used
=+(2) sale recognized along with an allowance for estimated returns, and (3) sale recognized with no allowance for estimated returns. SFAS No. 48 mandated revenue recognition for such sales subject to six conditions: (1) price is substantially fixed or deter-minable at sale date: (2) buyer has paid
=+b.Indicate the rationale for each of the SEAS No. 48 tests before a rev enue is recognized.
=+C.Is SFAS No. 18 an example of finite uniformity or of circumstantial variables as developed by Cadenhead (see Chapter 9)?
=+d. Discuss the role of future events in SFAS No. 48.
=+2. Accounting for the transfer of receivables with recourse has been prob-lematic. At issue is whether such a transaction is, in substance, a sale, in which case a gain/loss would be recognized, or a financing transaction.in which case any gain/loss should be amortized over the original life of
=+a.What is the critical issue in interpreting the nature of this transac-tion?
=+ How does interpretation of the critical issue lead to the two different viewpoints?
=+b. Explain why the SOP 74-6 view represents a revenue-expense orien-tation, while the SFAS No. 77 represents an asset-liability orientation.The Income Statement . Chapter 11
=+3. In its 1994 monograph on future events, the FASB discussed several ori-entations that might be related to asset valuation. As an example of its thinking, assume that we are assessing future sales of a product for the purpose of determining the value of the asset which is used to manu-facture
=+Determine (a) the modal (most likely individual unit sales), (b) the cumulative probability (summed probability of sales being either posi-tive or negative), and (c) the weighted probability number (expected value of probability times estimated sales times sales price).Part 2
=+How might these approaches be utilized to value the asset which is used to manufacture the product?
=+4. In 1983, a number of computer software companies reported use of an accounting procedure that was investigated by the SEC. The accounting policy is to capitalize the cost of developing computer software and amortize it over the life of the software (usually three to five years). This procedure
=+An official of Comserv, a small company that specializes in software, said that small companies would be in deep trouble because of SFAS No. 86. He said smaller companies would be under strong pressure to keep costs down if development costs had to be expensed. He also said, relative to the
=+The SEC's concern was whether this accounting policy was consis-tent with SFAS No. 2 concerning the expensing of research and devel-opment costs as incurred. In 1985, SFAS No. 86 treated software-related research and development costs the same as in SFAS No. 2.Required:a.Evaluate the software
=+b. Why is the choice of accounting policies (expensing vs. capitaliza-tion) more likely to affect smaller companies?
=+C.Comment on the claim that small companies "wouldn't be able to invest as much cash in their own growth if they couldn't use[ capitalization]." Is this a real economic consequence?
=+d. If you were a FASB member, how would you have voted on this issue?
=+5. Discuss the role of future events in the following revenue and expense recognition situations.a. Modification of terms under troubled debt restructuring in SFAS No. 114.
=+b.Pension accounting relative to measuring current expense in SFAS No. 87.
=+Other postretirement benefits under SFAS No. 106.
=+d. Full costing and successful efforts in oil and gas accounting as well as the SEC's reserve recognition accounting proposal.
=+6. Shown below is the bottom part of the income statement of Waste Management, Inc ., for the year ending December 31, 1998. Also shown below is a note from its financial statements showing the elements of its comprehensive income items, which were shown as part of the state-ment of changes in
=+h.Even though not allowed by the FASB, compute the EPS for com-prebensive income.
=+C.Do you think that elements specific to comprehensive income should be shown only in the statement of changes in equity?
=+d. Do you think there are circumstances in which Waste Management might desire to show comprehensive income elements within the income statement itself?
=+7. Utilizing the stock options proposal made in this chapter, show entity and proprietary income in the following situation for the Ethan Neil Corporation:Net income$4,810,000 Interest expense 182,000 Stock options expense (incentive)240,000 Income tax rate 40%The question of the usefulness of
=+3. Why is it difficult to evaluate the regulation question?
=+4. Why does accounting information have some features of a public good?
=+What are the implications for information production in both unregu-lated and regulated markets?
=+5. 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?
=+6. 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?
=+7. Who pays for accounting regulation and who benefits?
=+11. 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?
=+14. What is the relationship between public goods and free riders?
=+15. What is Pareto optimality? Why would adherence to it minimize account-ing standard setting?
=+16. How do agency theory and the codificational viewpoint differ in assumptions about the behavior of individuals?
=+17. Why does codification presume a democratic setting?
=+19. Would a regular quarterly announcement of earnings-per-share which is "good" be an example of signaling?
=+ What about early adoption of a new accounting standard that would reduce income?
=+21. Evaluate Ronen's financial statement insurance proposal.
=+22. Under financial statement insurance why would the relation between the firm and its auditor bear a slight resemblance to the relationship between Saddam Hussein and the weapons inspectors from the United Nations in 2002 and 2003?
=+23. What is due process in financial accounting standard-setting?
=+24. Why do companies, even those with "bad news," have an incentive to disclose financial reporting information?
=+25. Does the ability to swiftly-and at no cost-download music files con-vert this music from a private good to a public good?
=+1. What is the relationship among agency theory, economic conse-quences, and signalling? Explain in depth,
=+2. Benston (1982, p. 102), in an analysis of corporate social accounting and reporting (CSAR), says: "The social responsibility of accountants can be expressed by their forebearing from social responsibility accounting." However, in a critique of Benston's analysis, Schreuder and Ramanathan
=+The comments ... do not purport to convey the message that there is no value at all in analyzing the potential of CSAR from a shareholder perspective and proceeding from the (implicit) assumption of perfect and complete markets. We do, howwuer, wish to point out that this may not be the most
=+3. Discuss the economic consequences issues that are present in cach of the following transaction situations.
=+3.SFAS No. 13 allows lease contracts to be established so that the transaction can usually be set up as an operating lease rather than a capital lease.
=+b.When SFAS No. 19 was passed, medium-sized petroleum exploration firms campaigned hard to set it aside, SFAS No. 19 would have allowed successful efforts only, whereas the lobbying firms wanted an unrestricted choice between full costing and successful efforts.
=+c.A securities industry group objected to part of APB Opinion No. 10.which would have required that all convertible debt be broken down into debt and equity portions at the time of issue. The debt portion (bonds payable plus premium or minus discount) would be booked at the effective rate without
=+d.SFAS No. 87 does not show the full pension obligation or liability in the balance sheet (although a "minimum" liability may be present).e.
=+SFAS No. 96 made it much more difficult to recognize deferred tax assets as opposed to deferred tax liability (a more even-handed treatment was used in recognizing deferred tax assets and liabilities in SEAS No. 109, which superceded SFAS No. 96).
=+f. The FASB tried to include the cost of stock options as an expense but it was prevented from doing so by vociferous opposition from the business community.
=+4. Why do you think financial executives appear to have a higher mean for materiality judgments when expressed as a percentage of net income than either certified public accountants or financial analysts?
=+6. Why do you think the equity theories are less important today than they were, say, 30 years ago?
=+10. Why has the entity theory fragmented into two separate conceptions?
=+13. Postulates are supposed to be tight enough to prevent conflicting con-clusions being deduced from them. Is this the case with ARS I?
=+14. Is it fair to categorize ARS 1 and ARS 3 as failures?
=+15. How do the imperative postulates (group C) differ from the other two categories of postulates?
=+16. Distinguish among the terms realized, realizable, and realization.
=+20. Why is the residual equity theory more in line with recent research in finance than entity and proprietary theory?

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Accounting Theory Conceptual Issues In A Political And Economic Environment 6th Edition Harry I. Wolk, James Dodd, Michael G. Tearney - Solutions

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