Accounting for stock options is a controversial issue. The FASB recognized that the “intrinsic value” method, which had been used for years, failed to adequately account for the costs involved. To rectify the problem they suggested the use of a “fair value” method. Their proposal met with strong objections from companies, which were concerned with the impact of the proposed standard on their reported profits. Consequently, the board relented and allowed the use of either method. Unfortunately, both the intrinsic value and the fair value approaches have deficiencies, particularly in regard to how they measure compensation expense and gains and losses over time. This paper addresses these shortcomings by developing two alternative cost measurement approaches that apply an option-pricing model on an iterative basis over the life of the option. Both approaches represent specific ways to implement exercise-date measurement techniques for stock options. The paper argues that both approaches provide more relevant and reliable measures of an option’s cost than either the intrinsic or the fair value methods.

Although Corporate America has expended great efforts to shrink the gender equity gap at all levels, there is persistent evidence in the financial press that the gap still exists. This study focuses on the gender equity gap in the most highly compensated positions within corporations. Using Standard & Poor’s Compustat ExecuComp database for 1992-1997, we find that only 3% of the most highly compensated executives are female, that these positions are held disproportionately by men, and that female executives are more likely to be clustered in particular industry groups. In a sample matched by job title, company size and industry, male executives earn significantly higher salaries and bonuses, though total compensation is not significantly different. However, these compensation differences may be explained by differences in human capital characteristics such as age and tenure within a particular job title. Thus, the gender equity gap at top executive positions may be due more to a lack of opportunity than to wage discrimination.

Corporate Pension Plans: How Consistent are the Assumptions in Determining Pension Funding Status? Full Text
Vol. 17, No. 2, p. 23
Gale E. Newell, Western Michigan University
Jerry G. Kreuze, Western Michigan University
David Hurtt, Western Michigan University

With the bankruptcy of Enron and the accompanying loss of pension benefits of its employees, pensions have recently received significant press. Accounting for pension plan obligations, for defined benefit plans in particular, requires companies to make assumptions regarding discount rates, projected salary increases, and expected long-term return on plan assets. Such assumptions in turn determine the funding status of the pension plan and the annual pension expense. Higher assumed discount rates reduce the pension obligation, enhance the funding status of the plan, and reduce any lump-sum payments. Higher expected return on assets reduces the current pension expense. This study investigates the relationship between pension plan assumptions and the funding status of a pension plan. The results reveal that companies with pension plans that are more fully funded assume higher discount rates and expected long-term return on assets than do companies with less funded plans. The effect of these assumptions is that higher discount rate assumptions lead to better funding status, and higher expected long-term rates of return on assets partially offset the pension expense impacts of these higher discount rate assumptions. We are doubtful that more funded plans collectively should be assuming higher discount rates and expected long-term return on plan assets, especially since the actual return on plan assets investigated did not correlate with these assumptions.

An Investigation of Auditor and Client Tenure Full Text
Vol. 16, No. 2, p. 31
David H. Sinason, Northern Illinois University
Jefferson P. Jones, Auburn University
Sandra Waller Shelton, DePaul University

The purpose of this study is to examine the duration of the auditor’s relationship with a client and factors that affect audit firm tenure. The duration of the auditor and client relationship has been cited as possibly affecting the risk of a loss of auditor independence. Also, audit firm tenure has been used as an independent variable in several studies with variations on the characterization of a “long auditor-client association.” However, little is known about the duration of the auditor’s relationship with a client. Generally, no empirical justification is provided for the treatment of the variable and no consideration is included for auditor or client factors that may affect the relationship. This study evaluates the duration of the auditor relationship with a client and determines which factors contribute to changes in that relationship. In an examination of 16,976 COMPUSTAT companies over a twenty-year period, the mean duration of audit tenure is found to be more than six years. However, audit tenure is affected by client size, client growth rate, and type of audit firm involved in the change of auditor. Audit tenure is not affected by audit firm size, client risk, or audit opinion.

Value Relevance of Unrealized Foreign Currency Translation Gains and Losses Full Text
Vol. 16, No. 2, p. 55
Mohammad S. Bazaz, Oakland University
David L. Senteney, Ohio University

This study uses an equity valuation model to investigate the extent to which SFAS No. 52 unrealized foreign currency translation gains and losses are reflected in levels of equity security prices. Equity security price is used as the dependent variable in our selected model. Book value of equity (adjusted for the cumulative translation gain or loss), earnings, and cumulative translation gains and losses are used as independent variables. Our results indicate that, generally, translation gains and losses are valued, but losses have a greater impact than gains and the value seems to change over time in setting the levels of equity share prices of US-based MNCs. On a pooled basis, the results are clearly statistically significant, although the statistical significance of the results appears to vary with the annual time period examined. Our results are consistent with the SFAS No. 52 intention that these gains and losses be treated as unrealized as the net exposure is considered long-term in nature for foreign currency functional currency subsidiaries. Our results appear consistent with extant literature suggesting that unrealized foreign currency translation gains and losses are directly valued - although not dollar for dollar - in a manner similar to earnings (i.e., unrealized gains are associated with positive equity returns and unrealized losses are associated with negative equity returns).

CEO Compensation, Performance Variables, and Socially Responsible Investing Full Text
Vol. 15, No. 1, p. 39    
David N. Hurtt, Western Michigan University
Jerry G. Kreuze, Western Michigan University
Sheldon A. Langsam, Western Michigan University

Significant investment dollars are now allocated to companies deemed by investors as socially responsible. This socially responsible theme contends that corporations should be held accountable for the totality of their actions and decisions, including CEO compensation levels. This paper investigates whether CEO compensation levels are more associated with traditional performance measures for socially responsible firms than for firms deemed not socially responsible, with the assumption being that social choice firms will be more sensitive to and may attempt to align CEO compensation levels with corporate performance. Rank correlation analysis and regression results using nine performance variables for 270 firms indicated that CEO compensation levels at social choice companies were more highly associated with performance variables than those at nonsocial companies. The study results suggest that social choice companies, in addition to their other corporate good deeds, seem to include CEO compensation levels as a part of their overall corporate decision process.

Disclosure of Year 2000 Issues in Corporate Financial Reports Full Text
Vol. 14, No. 2, p. 21  
Marilyn Kintzele, Indiana University-Kokomo
Philip Kintzele, Central Michigan University
Vernon Kwiatkowski, Central Michigan University

The Year 2000 represents a significant challenge for many organizations. Financial report users, which include investors, creditors, suppliers, customers, employees, as well as others, have an interest in knowing how organizations are dealing with the Year 2000 issue. There could be significant negative consequences for organizations that fail to properly address the Year 2000 issue. Public corporations that have material issues associated with the Year 2000 issue are required by the United States Securities and Exchange Commission (SEC) to disclose specific information in their annual financial reports. This paper introduces the Year 2000 issue and reviews the development of public corporation annual report disclosures that are required and recommended by the SEC. The annual reports of 51 companies, which had fiscal years ending in the last half of 1998, were selected from the S&P 500 and were examined for the quality and quantity of Year 2000 disclosures. While all of the companies examined provided some Year 2000 disclosures, very few of the companies provided all of the required and recommended practices set forth by the SEC and some appeared to report in a severely deficient manner.

A Documentation Model for the Contemporary Accounting Information System  Full Text
Vol. 14, No. 2, p. 29  
C. William Cummings, Northern Illinois University
Deborah D. Pavelka, Roosevelt University
Ruth Ann Friedberg, Illinois Wesleyan University

This article examines some of the problems with documentation in accounting information systems (AIS). At present, there is no standard for documentation and there is a wide variety of techniques and documentation items found in such systems today. The "constituents" of the AIS who are users, maintainers, and auditors, need high quality, consistent, and useable documentation in order to carry out their jobs effectively. As a prelude to developing a model for AIS documentation, the article reports the results of a survey of accountants who use documentation in their work. The survey identified thirty items believed by the respondents to be important for inclusion in documentation packages. These items centered on the database, analysis and design, and control and security areas. Based upon the review of the literature and the findings of the documentation survey, the article concludes by proposing a model package which would provide basic documentation for a general AIS overview, database, analysis and design, user instructions, and control/audit/security components. User needs and preferences coupled with the system environment would indicate items which could be added to the basic documentation package proposed here.

The Relationship of Net Income to Comprehensive Income: An Analysis of Fortune 500 Companies Full Text
Vol. 14, No. 1, p. 53  
Jerry G. Kreuze, Western Michigan State University
Gale E. Newell, Western Michigan State University

The Financial Accounting Standards Board (FASB) has recently issued Statement of Financial Accounting Standards, (SFAS) No. 130, Reporting Comprehensive Income. That Statement requires companies to report a comprehensive income measure, which includes net income and net-of-tax adjustments for changes in unrealized gains/losses on securities, foreign currency gain/loss adjustments, and minimum pension liability adjustments. These latter adjustments were previously reported directly in the stockholders' equity section of the statement of financial position. This paper analyzes the effects of comprehensive income disclosures for 100 randomly selected Fortune 500 companies. Comprehensive income was computed for these companies and compared with reported net income to determine the number and significance of these other comprehensive income adjustments. The results indicate that a large number of firms may report a comprehensive income amount different from reported net income. Although these differences may be significant for some firms, the majority of these adjustments will not cause comprehensive income to be materially different from reported net income for most firms.

Gender Differences in the Job Attitudes of Accountants Full Text
Vol. 13, No. 2, p. 35  
Jane E. Baird, Mankato State University
Robert C. Zelin II, Mankato State University
Dale E. Marxen, Mankato State University

The cost of losing quality employees can be expensive for companies and firms. Higher rates of turnover for women, particularly in public accounting, have sparked efforts to resolve the problem. To further understanding of the current job attitudes of men and women accountants, over 500 accounting graduates employed in a variety of positions were surveyed.

Scales were used to measure the following job attitude: two types of Organizational Commitment (Affective Commitment and Continuance Commitment), Job Satisfaction, Intrinsic Satisfaction, Job Security and Turnover Intentions. The results indicated that the men and women accountants had many similar, positive job attitudes, but there were some notable cross-gender differences. Overall, men tended to be more intrinsically satisfied and affectively committed to their jobs, primarily because they were older and had been in their jobs longer. For the women, unlike the men, job tenure was not associated with higher satisfaction levels or greater feelings of attachment to their organizations. Additionally, economic-related factors such as percentage of household income contributed, job security, and continuance commitment (attachment to a job's benefits) were associated with lower reported turnover intentions for men, but not for women.

Downsizing, Corporate Performance, and Shareholder Wealth Full Text
Vol. 13, No. 1, p. 11  
Diana R. Franz, University of Toledo
Dean Crawford, State University of New York at Oswego
Deborah J. Dwyer, University of Toledo

Restructuring events, such as downsizing, can either halt a downward spiral in corporate performance perpetuate that downward spiral (Lindsley, Brass and Thomas 1995). This dual nature of downsizing is reflected in the mixed results found by prior researchers. We recognize the dual nature of downsizing by categorizing events according to the firm's financial condition preceding the announcement of the downsizing. We find a significant negative stock price reaction for firms that are financially healthy in the period preceding the announcement of the downsizing, but a statistically smaller reaction for firms that are in financial distress. The results suggest that the stock market views downsizing events consistent with the theory proposed by Lindsley, Brass and Thomas (1995).

What Customer Orders Really Cost Full Text
Vol. 13, No. 1, p. 41  
Robert J. Campbell, Miami University
Larry J. Rankin, Miami University

Manufacturing companies facing significant pricing competition need customer cost informations systems (CCISs) that reliably measure the resource costs of serving individual customers. Prices are often set by the market and competition, particularly from foreign imports, and severely restricts marketing's ability to adjust prices to cover costs. It is important that marketing personnel have access to accurate product and customer cost information. With such information, marketing personnel can make better pricing decisions, identify unprofitable customers, analyze lost bids, educate customers on ways to lower costs, and determine the best mix of products and customers.

This article reports the results of a field study conducted at a medium-sized Midwestern electronics manufacturing plant. The field study supports a useful example of a CCIS that can reliably measure the resource costs of serving individual customers and that can help marketing employees carry out their responsibilities more effectively. The CCIS as described herein identifies, measures and assigns three types of resource costs traceable to customer orders: customer variable costs assigned directly, technology costs assigned by the consumption of time in critical constraints, and human resource costs assigned by activity-based costing.

The Controversy over Accounting for Stock Options: A Historical Perspective Full Text
Vol. 12, No. 2, p. 29  
Karleen Nordquist, Black Hills State University
Dee Ann Ellingson, University of North Dakota

In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 entitled "Accounting for Stock-Based Compensation." The FASB began looking at the issue in 1984, at the request of many, including the Securities Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the largest public accounting firms, industry representatives, and other in the accounting profession. Even before the FASB issued its exposure draft on the subject in 1993, however, controversy began to surround its deliberations and decisions.

The FASB's exposure draft proposed that the cost of the stock options be expensed on the income statement, consistent with other forms of compensation. This differed greatly from the accounting rules of APB Opinion 25 in effect at the time, which usually resulted in no compensation expense on the income statement. As might have been expected, many companies did not relish the idea of expensing something that previously had no effect on their bottom line. Pressure to modify its position was exerted on the FASB by the very organizations that had asked FASB to look into the issue in the first place.

As a result of the controversy and accompanying pressure placed on the FASB, Statement 123 is a compromise that encourages, but does not require, the recording of compensation expense as it relates to stock options. Footnote disclosures of the effects of the new standard on net income and earnings per share are required for companies that elect to continue to apply the provisions of Opinion 25.

Although the FASB took up this issue in 1984, and the intense controversy over it began in 1993, the discussions and disagreements over accounting for stock-based compensation are not new. Differences of opinions are evident in the accounting literature as far back as the 1920s. While the definition of a stock option has not changed much since those early days, the exact purposes, uses, and accounting treatments have never been agreed upon. This paper examines some of the various positions that have been put forth over the years, looks at the recent FASB actions and controversy, and attempts to look forward at what might lie ahead in this area.

International Cultural Diversity and the Design of Management Accounting Systems Full Text
Vol. 12, No. 1, p. 69 
Peter C. Brewer, Miami University

This article uses Geert Hofstede's taxonomy of work-related cultural values to examine the relationship between international cultural diversity and the practice of management accounting. The discussion is presented in two parts. First, is a discussion of the relationship between international cultural diversity and the design of cost management systems. Second, management control systems are implicated into the discussion.

Profile of Early Adopters: SFAS 106 Full Text
Vol. 10, No. 1, p.5 
Bruce A. Leauby, La Salle University
Y. Joseph Ugras, La Salle University
Mary Jeanne Welsh, La Salle University

The Statement of Financial Accounting Standards No. 106, Employers' Accounting for Post retirement Benefits other than Pensions is a dramatic change in how companies measure the cost of providing other post retirement benefits (OPEBs). Companies must change from pay-as-you go (cash-basis) to an accrual method of accounting that is similar to that used for defined benefit pension plans.
Our review of early adopters shows that most firms (59 out 64) elected to recognize the transition obligation immediately, thereby reducing current earnings and showing all the bad news in the first year of adoption.

From an Income Statement viewpoint, the accrued based OPEB cost under SFAS 106 is 1.63 times larger than the previous year cash basis method, increasing from an average of $13 million to $21 million. From a Balance Sheet perspective, the average recorded liability as a percent of equity exceeds 15 percent.

Since companies will adopt this standard over a long transition period, it may be several years before valid comparisons and conclusions can be made about the the total impact of SFAS 106.

Professionalism and Internal Auditors: A Profile Full Text
Vol. 10, No. 1, p. 13 
Lawrence P. Kalbers, John Carroll University
Timothy J. Fogarty, Case Western Reserve University

The concept of professionalism of internal auditors is examined. A survey of a large sample of internal auditors revealed that internal auditors generally conform to a model of professionalism previously applied to other occupations. Especially notable, internal auditors strongly believe in the importance of internal auditing. The relationship between the dimensions of professionalism and levels of education, certification, and rank are also explored. Implications for professionalism in internal auditing are discussed.

Client Satisfaction in Service Organizations: The Case of an Accounting Firm Full Text
Vol. 9, No. 2, p.47 
Sita C. Amba-Rao, Indiana University at Kokomo
Jatinder N.D. Gupta, Ball State University

Clients in an accounting firm were surveyed to identify factors relating to client satisfaction in service organizations. Four independent variables--communication, responsiveness, service quality, and effectiveness--correlated with, and explained the variance in client satisfaction. Interpretation and implications for business practice are discussed and practical guidelines for enhancing client satisfaction are offered.

An Operational Audit of the Engineering Function of a Public Electric Utility Full Text
Vol. 8, No. 2, p.59
Gouranga Ganguli, University of Texas--Pan American

As a step toward preparing for making a request to regulating authorities for a rate increase, utility companies should evaluate their internal levels of performances that affect the cost of providing services to their customers. Engineering operations, by providing the generation of power, are at the heart of the multifaceted activities of utility companies. Since huge costs are involved in this area, any evaluation of the economy, efficiency, and effectiveness of the utility's performance has to be undertaken with an assessment of the level of performance of its engineering operations. A periodic operational audit of this vital area is thus extremely important.

Apart from the cost considerations involved, an operational audit, by evaluating the efficiency of the engineering operations, can also act as a surrogate for measuring the efficiency with which power generation is being carried out and distributed to its customers.

Accounting for Non pension Post retirement Benefits: Analysis of Lobbying Activities Full Text
Vol. 8, No. 1, p.25 
Jerry G. Kreuze, Western Michigan University
Sheldon A. Langsam, Western Michigan University
Gale E. Newell, Western Michigan University

The objective of this paper is to analyze the lobbying activities of the Financial Accounting Standards Board's (FASB) constituents to the Exposure Draft of Statement 106, "Employer's Accounting For Post retirement Benefits Other Than Pensions." Specifically, the association between the provisions which changed between the Exposure Draft and Statement 106 and the comments received in the 477 comment letters was investigated. The results indicate that the four issues (out of 21 issues) that were modified in whole or in part were strongly opposed by the majority (90% or greater) of respondents. None of the issues favored by respondents were modified. Opinions among respondent types (industrialists, actuaries, public accountants, insurance representatives, and other), while generally quite similar, did vary on certain issues. Since the FASB did modify issues strongly opposed by respondents, the results provide some faith in FASB's due process procedure and should encourage constituents to participate in future FASB decisions.

FASB Damage Control for Small and Medium-Size Firms: A Strategy to Influence Rule-Making Full Text
Vol. 7, No. 2, p.11 
Dale Buckmaster, University of Delaware

Accounting rules promulgated by the Financial Accounting Standards Board (FASB) can have economic consequences for most firms in the United States. The objective of this paper is to provide a cost-effective lobbying strategy for small and medium-size firms. It includes a brief discussion of the potential economic consequences of new accounting rules and of the structure and operating procedures of the FASB. Small and medium-size firms can best direct their lobbying efforts through representational organizations and by written comments on FASB proposals. This paper identifies the appropriate role of representational organizations and provides a guide for the preparation of comments by the firm.

A Performance Model for Staff Internal Auditors: Implications for Personnel Management Full Text
Vol. 7, No. 2, p.19 
Joseph M. Larkin, St. Joseph's University
James A. Schweikart, University of Richmond

Understanding individual traits associated with successful performance in internal auditing is needed to enhance efficiency in personnel policies affecting staffing, career development, and retention of auditors and managers trained in internal auditing. This study attempted to ascertain salient characteristics of individuals that may be associated with successful performance, by examining traits of successful and less successful auditors of a large manufacturing firm. The results show that of the characteristics analyzed, individual levels of job satisfaction and motivation are most closely associated with performance.

Evidence of Auditing as a Deterrent to Financial Reporting Irregularities Full Text
Vol. 7, No. 1, p.24
Arnold Schneider, Georgia Institute of Technology
Neil Wilner, University of North Texas

This article investigates the impact of auditing on the commission of financial reporting irregularities by managers. We also examine whether the deterrent effect of auditing is affected by individual demographics. An experiment, using three case scenarios, was employed. Our findings indicated that auditing had a strong deterrent effect when the following conditions were present: material dollar amounts, irregularities involving asset overstatements, unambiguous violations of accounting principles, and low incentive for misstating income. While age, experience, and contact with auditors did not influence the deterrent effect of auditing, we found evidence that respondents with accounting and finance specializations perceived auditing as a greater deterrent than other respondents.

Rebuilding the Accounting Systems Infrastructure: A Case Study Full Text
Vol. 6, No. 2, p.69
Linda Garceau, Cleveland State University
Brad Lavish, East Ohio Gas

Today, a major capital investment decision faces many business organizations. Corporations must decide whether to invest in rebuilding their aging accounting systems or to divert funds to other systems development projects that may have a more immediate, bottom-line impact. This article addresses many of the factors that must be considered by management when evaluating these investment alternatives. It identifies the underlying reasons that can drive the decision to rebuild the accounting systems environment, as well as the challenges that the designer must face when this decision is made. It then presents a study of an organization that has successfully addressed and resolved these issues, identifying the benefits that they have derived with their decision to invest in the rebuilding of their accounting systems environment.

A Control Model for Assessing Quality Costs Full Text
Vol. 6, No. 1, p. 40
Heidi Hylton Meier, Cleveland State University

Measuring quality costs is becoming an increasingly more important task for accountants. This is especially true in light of new definitions and goals of quality programs, which are primarily to produce goods and services with zero defects while preventing problems, improving reliability and eliminating waste. This article examines how accountants can provide cost information using the traditional quality-cost model along with expected value techniques so that managers may make more effective decisions to accomplish these goals.

Accounting for Future-Oriented Expenditures: Change is Needed Full Text
Vol. 5, No. 1, p. 13
Jayne Fuglister, Cleveland State University
William Paxton, Cleveland State University

Financial reporting standards require that many future-oriented expenditures for intangibles, such as development costs and personal training, be expensed in the current period. These standards cause such expenditures to be indistinguishable from expenditures for current revenues, and penalize the earnings of firms making future-oriented expenditures for intangibles. The current focus on earnings encourages firms to sacrifice long-term economic objectives for higher reported earnings. This paper analyzes the need for improved reporting for future-oriented expenditures. Improved accounting for future-oriented expenditures would enhance the market's ability to value stocks, improve company performance, and benefit investors and creditors.

Postretirement Benefits Other Than Pensions: Preparing for the Proposed Standard Full Text
Vol. 5, No. 1, p. 19
William Cron, Central Michigan University
Philip L. Kintzele, Central Michigan University

Because of the dramatic increase in health care costs and the fact that more people are retiring earlier and living longer, the issue of postretirement benefit costs other than pensions has become a topic of great interest to issuers and users of financial statements. The Financial Accounting Standards Board is in the process of requiring corporations to report these expected future postretirement costs as liabilities. This paper examines the proposed treatment of postretirement benefits costs and discusses alternative strategies a company may adopt to prepare for implementation of the standard.

Is In-Substance Defeasance of Debt Too Good To Be True? Full Text
Vol. 4, No. 2, p. 15
Barbara Apostolou, Louisiana State University
Raymond Jeffords, University of Tennessee-Chattanooga

Many managers have taken advantage of the benefits associated with engaging in in-substance defeasance of debt. For example, defeasance can generate accounting gains that result in higher reported income and earnings per share without a corresponding change in cash flows. Since the inception of this transaction in 1982, controversy over the accounting treatment of defeasance resulted in the issuance of Statement of Accounting Standards No. 76, Extinguishment of Debt. However, unsettled issues remain. This article describes the evolution of the defeasance transaction, the related controversial points, and explores the unsettled issues that remain so that due consideration can be given to a contemplated defeasance transaction.

Auditor Selection: Impact of Audit Committees Full Text
Vol. 4, No. 1, p. 33
Philip G. Cottell, Jr., Miami University
Larry J. Rankin, Miami University

This article reports the results of a study designed to measure whether an SEC rule requiring audit committees might have an anticompetitive impact on auditor selection. Despite concerns expressed by the American Institute of Certified Public Accountants and others, the results of this study do not substantiate the contention that such a rule would favor Big-Eight auditors. Rather, the results suggests that while movement toward Big-Eight auditors is prevalent among NASD-listed companies, the existence of an audit committee does not explain the displacement. It appears that such as SEC rule would not unfavorably impact the competition of audit services.

Cost Finding and Control for Flexible Manufacturing Systems Full Text
Vol. 3, No. 1, p. 37
Zachariah Mathew, Ithaca College
Yunus Kathawala, Eastern Illinois University

The use of robots to supplant direct labor, automated materials handling, computer controlled flexible manufacturing systems which are capable of producing a number of products within the same product line, and just-in-time production and distribution are creating a new manufacturing environment. As in the past, the need for assignment and control of direct material costs remain; however, the allocation and control of conversion costs, based on the materials used or units produced, is not possible. A machine cost per minute is, therefore, developed in order to allocate conversion costs to products and to effectuate control over such costs.

The Financial Accounting System Viewed as a Control System Full Text
Vol. 3, No. 1, p. 42
Neil A. Wilner, North Texas State University

This paper views the outputs of the accounting information system as elements of a control system. These outputs may be of a financial accounting nature as well as a managerial accounting nature. Rewards for management are often based on measures typically found in the annual reports. Managers have an interest in making sure these measures are favorable. This paper presents ways for management to deal with situations where what is good (bad) for the manager may be bad (good) for the company.

Developing a Productivity Budgeting System Full Text
Vol. 2, No. 2, p. 27
Robert J. Campbell, Miami University

Reduction of unit product or service costs, even though many resource prices are increasing, has a high priority in many manufacturing firms due to competitive pressures from worldwide producers. Cost savings can occur when resource quantities per unit are reduced. This article describes an approach to formally recognizing productivity improvement goals in divisional and factory planning budgets. These goals are quantified in the form of productivity indices for major cost categories. Formal recognition of these goals during planning and their inclusion in periodic performance measurement ill motivate managers to develop and implement programs to achieve desired unit cost reduction targets.

Rental Property Tax Shelters: An Update Full Text
Vol. 2, No. 1, p. 9
L. Murphy Smith, Texas A&M University
Bob G. Kilpatrick, Texas A&M University

Of all investments that provide tax incentives, real estate is the most often used. Frequently, books and articles for the general public appear that feature titles such as "How to Make a Fortune In Real Estate" or "Real Estate Investments Can Make You Independently Wealthy."

The way to make a profit in real estate investments has changed considerably during the last decade. There have been major changes in tax laws as well as the economic environment.

This article will focus on investments in residential housing (i.e. rental property) as tax shelters. It addresses some of the critical considerations in the rental property investment decision, including the effects of the recent changes in federal tax law. A comprehensive example of a rental property investment demonstrates the effect of tax reform on the calculations of ROI.

The Impact of Tax Simplification on Mortgage Buyouts Full Text
Vol. 1, No. 2, p. 47
Walt Woerheide, University of Michigan–Flint
John Marquardt, University of Michigan–Flint

Whenever current mortgage rates are substantially higher than previous levels, mortgage leaders may find it attractive to extend to the borrowers a special opportunity to prepay to identify the important issues in the buy-out decision, analyze how buy-back proposals might work using representative mortgages dating back to 1961, and to evaluate how current tax reform proposals with affect the buy-out programs profitable, while it is the borrowers in the lowest brackets that would find buy-outs most attractive. The lack of lenders with high marginal tax rates suggests why years. The analysis of several recently proposed tax plans indicates that buy-out programs should become more popular in the future, especially at such times as mortgage rates begin to climb again.