Accountancy Theory
Bob Jensen at Trinity University 

My Accounting Theory Document Was Split into Two Files on December 15, 2010

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Capsule Commentary Book Review, The Accounting Review, January 2012, pp. 356-357 ---
http://aaajournals.org/doi/full/10.2308/accr-10189

CAPSULE COMMENTARY

Stephen A. Zeff, Editor

HARRY I. WOLK (editor), Accounting Theory (London, U.K.: Sage Publications Ltd., 2009, ISBN 978-1-84787-609-6, pp. xlv, 1,518 in four volumes).

Harry I. Wolk, the compiler of this collection of 74 previously published articles and other essays, died in October 2009 at age 79. In 1984, he was assisted by two colleagues in writing a thoughtful, wide-ranging textbook on accounting theory, which is now in its seventh edition. He has, thus, been a close student of the accounting theory literature for many years.

Wolk's valedictory contribution is this anthology, which is divided into ten sections: philosophical background, accounting concepts, conceptual frameworks, accounting for changing prices, standard setting, applications of accounting theory to five measurement areas, agency theory, principles versus rules, international accounting standards, and accounting issues in East and Southeast Asia. Because he provides only a two-and-a-half-page general introduction, we cannot know the criteria he used to make these selections. The earliest of the articles dates from 1958, and one infers that this collection represents the body of work that, over his long career, mostly at Drake University, he found to be influential writings.

Among the major contributors to the theory literature represented in the collection are Devine, Mattessich, Davidson, Solomons, Sterling, Thomas, Bell, Shillinglaw, Bedford, Ijiri, and Stamp. Conspicuous omissions are Chambers, Baxter, Staubus, Moonitz, Sorter, and Vatter. Although many of the earlier pieces have stood the test of time, a number of the more recent selections would, inevitably, be open to second-guessing. To be sure, most of these articles can be accessed electronically, yet it is instructive to know the works that Harry Wolk believed were worth remembering, and it is handy to have them all in one collection.

The price tag of £600/$1,050 for the four-volume set will, unfortunately, deter all but the most enthusiastic purchasers.

Jensen Comment
And to think my constantly-updated accounting theory book (in two volumes) has a price tag of $0 (Sigh!)---
http://www.trinity.edu/rjensen/Theory01.htm

But I do thank Harry for providing me with an accounting illustration that I turned into the most popular Excel illustration that I ever authored (i.e., popular in the eyes of my students over the years) ---
www.cs.trinity.edu/~rjensen/Excel/wtdcase2a.xls

574 Shields Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

• With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier
• With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams
• With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR
• With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Steven J. Kachelmeier's July 2011 Editorial as Departing Senior Editor of The Accounting Review (TAR)

"Introduction to a Forum on Internal Control Reporting and Corporate Debt," by Steven J. Kachelmeier, The Accounting Review, Vol. 86, No. 4, July 2011 pp. 1129–113 (not free online) ---
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000004001129000001&idtype=cvips&prog=normal

One of the more surprising things I have learned from my experience as Senior Editor of The Accounting Review is just how often a ‘‘hot topic’’ generates multiple submissions that pursue similar research objectives. Though one might view such situations as enhancing the credibility of research findings through the independent efforts of multiple research teams, they often result in unfavorable reactions from reviewers who question the incremental contribution of a subsequent study that does not materially advance the findings already documented in a previous study, even if the two (or more) efforts were initiated independently and pursued more or less concurrently. I understand the reason for a high incremental contribution standard in a top-tier journal that faces capacity constraints and deals with about 500 new submissions per year. Nevertheless, I must admit that I sometimes feel bad writing a rejection letter on a good study, just because some other research team beat the authors to press with similar conclusions documented a few months earlier. Research, it seems, operates in a highly competitive arena.

Fortunately, from time to time, we receive related but still distinct submissions that, in combination, capture synergies (and reviewer support) by viewing a broad research question from different perspectives. The two articles comprising this issue’s forum are a classic case in point. Though both studies reach the same basic conclusion that material weaknesses in internal controls over financial reporting result in negative repercussions for the cost of debt financing, Dhaliwal et al. (2011) do so by examining the public market for corporate debt instruments, whereas Kim et al. (2011) examine private debt contracting with financial institutions. These different perspectives enable the two research teams to pursue different secondary analyses, such as Dhaliwal et al.’s examination of the sensitivity of the reported findings to bank monitoring and Kim et al.’s examination of debt covenants.

Both studies also overlap with yet a third recent effort in this arena, recently published in the Journal of Accounting Research by Costello and Wittenberg-Moerman (2011). Although the overall ‘‘punch line’’ is similar in all three studies (material internal control weaknesses result in a higher cost of debt), I am intrigued by a ‘‘mini-debate’’ of sorts on the different conclusions reache  by Costello and Wittenberg-Moerman (2011) and by Kim et al. (2011) for the effect of material weaknesses on debt covenants. Specifically, Costello and Wittenberg-Moerman (2011, 116) find that ‘‘serious, fraud-related weaknesses result in a significant decrease in financial covenants,’’ presumably because banks substitute more direct protections in such instances, whereas Kim et al. Published Online: July 2011 (2011) assert from their cross-sectional design that company-level material weaknesses are associated with more financial covenants in debt contracting.

In reconciling these conflicting findings, Costello and Wittenberg-Moerman (2011, 116) attribute the Kim et al. (2011) result to underlying ‘‘differences in more fundamental firm characteristics, such as riskiness and information opacity,’’ given that, cross-sectionally, material weakness firms have a greater number of financial covenants than do non-material weakness firms even before the disclosure of the material weakness in internal controls. Kim et al. (2011) counter that they control for risk and opacity characteristics, and that advance leakage of internal control problems could still result in a debt covenant effect due to internal controls rather than underlying firm characteristics. Kim et al. (2011) also report from a supplemental change analysis that, comparing the pre- and post-SOX 404 periods, the number of debt covenants falls for companies both with and without material weaknesses in internal controls, raising the question of whether the

Costello and Wittenberg-Moerman (2011) finding reflects a reaction to the disclosures or simply a more general trend of a declining number of debt covenants affecting all firms around that time period. I urge readers to take a look at both articles, along with Dhaliwal et al. (2011), and draw their own conclusions. Indeed, I believe that these sorts . . .

Continued in article

Jensen Comment
Without admitting to it, I think Steve has been embarrassed, along with many other accountics researchers, about the virtual absence of validation and replication of accounting science (accountics) research studies over the past five decades. For the most part, accountics articles are either ignored or accepted as truth without validation. Behavioral and capital markets empirical studies are rarely (ever?) replicated. Analytical studies make tremendous leaps of faith in terms of underlying assumptions that are rarely challenged (such as the assumption of equations depicting utility functions of corporations).

Accounting science thereby has become a pseudo science where highly paid accountics professor referees are protecting each others' butts ---
"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm
The above link contains Steve's rejoinders on the replication debate.

In the above editorial he's telling us that there is a middle ground for validation of accountics studies. When researchers independently come to similar conclusions using different data sets and different quantitative analyses they are in a sense validating each others' work without truly replicating each others' work.

I agree with Steve on this, but I would also argue that these types of "validation" is too little to late relative to genuine science where replication and true validation are essential to the very definition of science. The types independent but related research that Steve is discussing above is too infrequent and haphazard to fall into the realm of validation and replication.

When's the last time you witnesses a TAR author criticizing the research of another TAR author (TAR does not publish critical commentaries)?
Are TAR articles really all that above criticism?
Even though I admire Steve's scholarship, dedication, and sacrifice, I hope future TAR editors will work harder at turning accountics research into real science!

What Went Wrong With Accountics Research? --- http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm

Jean-Paul Sartre Breaks Down the Bad Faith of Intellectuals --- Click Here
http://www.openculture.com/2011/12/jean-paul_sartre_on_the_bad_faith_of_modern_intellectuals.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OpenCulture+%28Open+Culture%29

Purpose of Theory:  Prediction Versus Explanation

Hi Steve and Jagdish,

Buried in the 2011Denver presentation by Greg Waymire is a lament about two of my hot buttons. Greg mentions the lack of replication (shall we call them reproductions?) in findings (harvests)  published in academic accounting research journals. Secondly, he mentions the lack of commentary and debate concerning these these findings. It seems that there's not a whole lot of interest (debate) about those findings among practitioners or in our academy ---
http://commons.aaahq.org/hives/629d926370/summary 


At long last we are making progress in finally getting the attention of the American Accounting Association leaders regarding how to broaden research methods and topics of study (beyond financial reporting)  in academic accounting research. The AAA Executive Committee now has annual retreats devoted to this most serious hole that accountics researchers have dug (Steve calls it a "dig" in the message from Jagdish) us into over the past four decades.


Change in academic accounting research will come very slowly. Paul Williams blames the slowness of change on the accountics scientist-conspired monopoly. I'm less inclined to blame the problem of conspiracy. I think the biggest problem is that accountics research in capital markets studies is so much easier since the data is provided like manna from heaven from CRSP, Compustat, AuditAnalytics, etc. No added scientific effort to collect data is required by accountics scientists. At CERN, however, physics scientists had to collect new data to cast doubt on prevailing speed of light theory.


Two years ago, at a meeting, I encountered one of my former students who eventually entered a leading accounting PhD program and was completing his dissertation. When I asked him why he was doing a traditional accountics-science dissertation he admitted that this was much easier than having to collect his own data.


Now more to the point concerning the messaging of Jagdish and Steve is my message earlier this week about the physics of economics in general.

Purpose of Theory:  Prediction Versus Explanation

"Milton Friedman's grand illusion," by Mark Buchanan, The Physics of Finance: A look at economics and finance through the lens of physics, September 16, 2011 ---
http://physicsoffinance.blogspot.com/2011/09/milton-friedmans-grand-illusion.html

Three years ago I wrote an Op-Ed for the New York Times on the need for radical change in the way economists model whole economies. Today's General Equilibrium models -- and their slightly more sophisticated cousins, Dynamic Stochastic General Equilibrium models -- make assumptions with no basis in reality. For example, there is no financial sector in these model economies. They generally assume that the diversity of behaviour of all an economy's many firms and consumers can be ignored and simply included as the average behaviour of a few "representative" agents.

I argued then that it was about time economists started using far more sophisticated modeling tools, including agent based models, in which the diversity of interactions among economic agents can be included along with a financial sector. The idea is to model the simpler behaviours of agents as well as you can and let the macro-scale complex behaviour of the economy emerge naturally out of them, without making any restrictive assumptions about what kinds of things can or cannot happen in the larger economy. This kind of work is going forward rapidly. For some detail, I recommend this talk earlier this month by Doyne Farmer.

After that Op-Ed I received quite a number of emails from economists defending the General Equilibrium approach. Several of them mentioned Milton Friedman in their defense, saying that he had shown long ago that one shouldn't worry about the realism of the assumptions in a theory, but only about the accuracy of its predictions. I eventually found the paper to which they were referring, a classic in economic history which has exerted a huge influence over economists over the past half century. I recently re-read the paper and wanted to make a few comments on Friedman's main argument. It rests entirely, I think, on a devious or slippery use of words which makes it possible to give a sensible sounding argument for what is actually a ridiculous proposition. 

The paper is entitled The Methodology of Positive Economics and was first published in 1953. It's an interesting paper and enjoyable to read. Essentially, it seems, Friedman's aim is to argue for scientific standards for economics akin to those used in physics. He begins by making a clear definition of what he means by "positive economics," which aims to be free from any particular ethical position or normative judgments. As he wrote, positive economics deals with...
 

"what is," not with "what ought to be." Its task is to provide a system of generalizations that can be used to make correct predictions about the consequences of any change in circumstances. Its performance is to be judged by the precision, scope, and conformity with experience of the predictions it yields.

Friedman then asks how one should judge the validity of a hypothesis, and asserts that...
 

...the only relevant test of the validity of a hypothesis is comparison of its predictions with experience. The hypothesis is rejected if its predictions are contradicted ("frequently" or more often than predictions from an alternative hypothesis); it is accepted if its predictions are not contradicted; great confidence is attached to it if it has survived many opportunities for contradiction. Factual evidence can never "prove" a hypothesis; it can only fail to disprove it, which is what we generally mean when we say, somewhat inexactly, that the hypothesis has been "confirmed" by experience."

So far so good. I think most scientists would see the above as conforming fairly closely to their own conception of how science should work (and of course this view is closely linked to views made famous by Karl Popper).

Next step: Friedman goes on to ask how one chooses between several hypotheses if they are all equally consistent with the available evidence. Here too his initial observations seem quite sensible:
 

...there is general agreement that relevant considerations are suggested by the criteria "simplicity" and "fruitfulness," themselves notions that defy completely objective specification. A theory is "simpler" the less the initial knowledge needed to make a prediction within a given field of phenomena; it is more "fruitful" the more precise the resulting prediction, the wider the area within which the theory yields predictions, and the more additional lines for further research it suggests.

Again, right in tune I think with the practice and views of most scientists. I especially like the final point that part of the value of a hypothesis also comes from how well it stimulates creative thinking about further hypotheses and theories. This point is often overlooked.

Friedman's essay then shifts direction. He argues that the processes and practices involved in the initial formation of a hypothesis, and in the testing of that hypothesis, are not as distinct as people often think, Indeed, this is obviously so. Many scientists form a hypothesis and try to test it, then adjust the hypothesis slightly in view of the data. There's an ongoing evolution of the hypothesis in correspondence with the data and the kinds of experiments of observations which seem interesting.

To this point, Friedman's essay says nothing that wouldn't fit into any standard discussion of the generally accepted philosophy of science from the 1950s. But this is where it suddenly veers off wildly and attempts to support a view that is indeed quite radical. Friedman mentions the difficulty in the social sciences of getting
new evidence with which to test an hypothesis by looking at its implications. This difficulty, he suggests,
 

... makes it tempting to suppose that other, more readily available, evidence is equally relevant to the validity of the hypothesis-to suppose that hypotheses have not only "implications" but also "assumptions" and that the conformity of these "assumptions" to "reality" is a test of the validity of the hypothesis different from or additional to the test by implications. This widely held view is fundamentally wrong and productive of much mischief.

Having raised this idea that assumptions are not part of what should be tested, Friedman then goes on to attack very strongly the idea that a theory should strive at all to have realistic assumptions. Indeed, he suggests, a theory is actually superior insofar as its assumptions are unrealistic:
 

In so far as a theory can be said to have "assumptions" at all, and in so far as their "realism" can be judged independently of the validity of predictions, the relation between the significance of a theory and the "realism" of its "assumptions" is almost the opposite of that suggested by the view under criticism. Truly important and significant hypotheses will be found to have "assumptions" that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions... The reason is simple. A hypothesis is important if it "explains" much by little,...   To be important, therefore, a hypothesis must be descriptively false in its assumptions...

This is the statement that the economists who wrote to me used to defend unrealistic assumptions in General Equilibrium theories. Their point was that having unrealistic assumptions isn't just not a problem, but is a positive strength for a theory. The more unrealistic the better, as Friedman argued (and apparently proved, in the eyes of some economists).

Now, what is wrong with Friedman's argument, if anything?  I think the key issue is his use of the provocative terms such as "unrealistic" and "false" and "inaccurate" in places where he actually means "simplified," "approximate" or "incomplete."  He switches without warning between these two different meanings in order to make the conclusion seem unavoidable, and profound, when in fact it is simply not true, or something we already believe and hardly profound at all.

To see the problem, take a simple example in physics. Newtonian dynamics describes the motions of the planets quite accurately (in many cases) even if the planets are treated as point masses having no extension, no rotation, no oceans and tides, mountains, trees and so on. The great triumph of Newtonian dynamics (including his law of gravitational attraction) is it's simplicity -- it asserts that out of all the many details that could conceivably influence planetary motion, two (mass and distance) matter most by far. The atmosphere of the planet doesn't matter much, nor does the amount of sunlight it reflects. The theory of course goes further to describe how other details do matter if one considers planetary motion in more detail -- rotation does matter, for example, because it generates tides which dissipate energy, taking energy slowly away from orbital motion. 

But I don't think anyone would be tempted to say that Newtonian dynamics is a powerful theory because it is descriptively false in its assumptions. It's assumptions are actually descriptively simple -- that planets and The Sun have mass, and that a force acts between any two masses in proportion to the product of their masses and in inverse proportional to the distance between them. From these assumptions one can work out predictions for details of planetary motion, and those details turn out to be close to what we see. The assumptions are simple and plausible, and this is what makes the theory so powerful when it turns out to make powerful and accurate predictions.

Indeed, if those same predictions came out of a theory with obviously false assumptions -- all planets are perfect cubes, etc. -- it would be less powerful by far because it would be less believable. It's ability to make predictions would be as big a mystery as the original phenomenon of planetary motion itself -- how can a theory that is so obviously not in tune with reality still make such accurate predictions?

So whenever Friedman says "descriptively false" I think you can instead write "descriptively simple", and clarify the meaning by adding a phrase of the sort "which identify the key factors which matter most." Do that replacement in Friedman's most provocative phrase from above and you have something far more sensible:
 

A hypothesis is important if it "explains" much by little,...   To be important, therefore, a hypothesis must be descriptively simple in its assumptions. It must identify the key factors which matter most...

That's not quite so bold, however, and it doesn't create a license for theorists to make any assumptions they want without being criticized if those assumptions stray very far from reality.

Continued in article

Jensen Comment
Especially note the comments at the end of this article.

My favorite is the following:

Herbert Simon (1963) countered Friedman by stating the purpose of scientific theories is not to make predictions, but to explain things - predictions are then tests of whether the explanations are correct.

Both Friedman and Simon's views are better directed to a field other than economics. The data at some point will always expose the frailest of assumptions; while the lack of repeatable results supports futility in the explanation of heterogeneous agents.

September 16, 2011 3:27 PM

That's perceptive. Scientists should just steer clear of economics. Economics is so complex it is better suited to astrologists.

Also see the following comment"

David K. Waltz said...

There are certainly financial theories with patently false assumptions. For example, the Capital Asset Pricing Model:

> all investors are rational
> all investors have perfect information
> all investors can borrow and lend at the risk-free rate
> all investors can buy and short the market in unlimited quantities

We know none of these assumptions are true. How many of us can borrow at the risk-free rate? Yet they are some of the assumptions that underlie Nobel Prize winning theories.

As suggested in the blog, these false assumptions are made because they are ancillary to the main point of the theory, which speaks to asset pricing being a function of risk vs. return, and how these assets together comprise portfolios.

For these items the above does not matter.

However, if we were to go about modeling the stock or bond market for a month to assess our own portfolio, the false assumptions would matter greatly.

I wrote a brief blog post along similar track a couple months back if you are interested -
http://treasurycafe.blogspot.com/2011/07/capm-interlude-theory-of-theory.html 

September 16, 2011 9:39 PM

Bob Jensen's threads on accounting theory are at
http://www.trinity.edu/rjensen/Theory01.htm

Special Notice:

Accounting Scholarship that Advances Professional Knowledge and Practice
Robert S. Kaplan
The Accounting Review, March 2011, Volume 86, Issue 2, 

Recent accounting scholarship has used statistical analysis on asset prices, financial reports and disclosures, laboratory experiments, and surveys of practice. The research has studied the interface among accounting information, capital markets, standard setters, and financial analysts and how managers make accounting choices. But as accounting scholars have focused on understanding how markets and users process accounting data, they have distanced themselves from the accounting process itself. Accounting scholarship has failed to address important measurement and valuation issues that have arisen in the past 40 years of practice. This gap is illustrated with missed opportunities in risk measurement and management and the estimation of the fair value of complex financial securities. This commentary encourages accounting scholars to devote more resources to obtaining a fundamental understanding of contemporary and future practice and how analytic tools and contemporary advances in accounting and related disciplines can be deployed to improve the professional practice of accounting. ©2010 AAA

 

The videos of the three plenary speakers at the 2010 Annual Meetings in San Francisco are now linked at
http://commons.aaahq.org/hives/531d5280c3/posts?postTypeName=session+video
I think the video is only available to AAA members.

Although all three speakers provided inspirational presentations, Steve Zeff and I both concluded that Bob Kaplan’s presentation was possibly the best that we had ever viewed among all past AAA plenary sessions. And we’ve seen a lot of plenary sessions in our long professional careers.

Now that Kaplan’s video is available I cannot overstress the importance that accounting educators and researchers watch the video of Bob Kaplan's August 4, 2010 plenary presentation
http://commons.aaahq.org/hives/531d5280c3/posts?postTypeName=session+video
Don’t miss the history map of Africa analogy to academic accounting research!!!!!

This dovetails with my Web document at
http://www.trinity.edu/rjensen/TheoryTAR.htm

Also see (slow loading)
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

Trivia Questions
1.  Why did Bob wish he’d worn a different color suit?

2.  What does JAE stand for besides the Journal of Accounting and Economics?

Note that to watch the entire Kaplan video ---
http://commons.aaahq.org/hives/531d5280c3/posts?postTypeName=session+video
I think the video is only available to AAA members.

PS
I think Bob Kaplan overstates the value of the academic valuation models in leading accounting research journals, at least he overvalues their importance to our practicing profession.

September 9, 2011 reply from Paul Williams

Bob,
I have avoided chiming in on this thread; have gone down this same road and it is a cul-de-sac.  But I want to say that this line of argument is a clever one.  The answer to your rhetorical question is, No, they aren't more ethical than other "scientists."   As you tout the Kaplan speech I would add the caution that before he raised the issue of practice, he still had to praise the accomplishments of "accountics" research by claiming numerous times that this research has led us to greater understanding about analysts, markets, info. content, contracting, etc.  However, none of that is actually true.  As a panelist at the AAA meeting I juxtaposed Kaplan's praise for what accountics research has taught us with Paul Krugman's observations about Larry Summer's 1999 observation that GAAP is what makes US capital markets so stable and efficient.  Of course, as Krugman noted, none of that turned out to be true.  And if that isn't true, then Kaplan's assessment of accountics research isn't credible, either.  If we actually did understand what he claimed we now understand much better than we did before, the financial crisis of 2008 (still ongoing) would not have happened.  The title of my talk was (the panel was organized by Cheryl McWatters) "The Epistemology of Ignorance."  An obsessive preoccupation with method could be a choice not to understand certain things-- a choice to rigorously understand things as you already think they are or want so desperately to continue to believe for reasons other than scientific ones. 

Paul

Gaming for Tenure as an Accounting Professor ---
http://www.trinity.edu/rjensen/TheoryTenure.htm
(with a reply about tenure publication point systems from Linda Kidwell)

"So you want to get a Ph.D.?" by David Wood, BYU ---
http://www.byuaccounting.net/mediawiki/index.php?title=So_you_want_to_get_a_Ph.D.%3F

Do You Want to Teach? ---
http://financialexecutives.blogspot.com/2009/05/do-you-want-to-teach.html

Jensen Comment
Here are some added positives and negatives to consider, especially if you are currently a practicing accountant considering becoming a professor.

Accountancy Doctoral Program Information from Jim Hasselback ---
http://www.jrhasselback.com/AtgDoctInfo.html 

Why must all accounting doctoral programs be social science (particularly econometrics) "accountics" doctoral programs?
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

Advice and Bibliography for Accounting Ph.D. Students and New Faculty by James Martin ---
http://maaw.info/AdviceforAccountingPhDstudentsMain.htm

"So you want to get a Ph.D.?" by David Wood, BYU ---
http://www.byuaccounting.net/mediawiki/index.php?title=So_you_want_to_get_a_Ph.D.%3F

Why accountancy doctoral programs are drying up and why accountancy is no longer
required for admission or graduation in an accountancy doctoral program ---
http://www.trinity.edu/rjensen/Theory01.htm#DoctoralPrograms

Bob Jensen's threads on what went wrong with "accountics research" can be found at
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

 

What went wrong in accounting/accountics research?
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

In an IAE paper, Wood et al. issues its rankings of the best college accounting research programs.
Issues in Accounting Education, November 2010, Volume 25, Issue 4, pp. 613-xv
Also see http://www.byuaccounting.net/rankings/univrank/rankings.php

Although I will not dwell on details here, practitioners are generally interested in clever discoveries of how to make computer software, XBRL, Google Wave, cloud computing, computer gadgets, cloud computing, pattern recognition, data visualization, and many other technology innovations relative to the practice of accountancy. For example, I've attempted (thus far unsuccessfully) to discover useful ways of visualizing multi-dimensional accounting variables (including Chernoff faces) ---
http://www.trinity.edu/rjensen/352wpvisual/000datavisualization.htm
Alas, I'm a failure, along with most academic accounting researchers, as an applied researcher thus far in life. My leading journal publications, like other leading accounting research publications, have mostly been irrelevant "accountics" contributions ---
http://www.trinity.edu/rjensen/resume.htm#Published

Not everything that can be counted, counts. And not everything that counts can be counted.
Albert Einstein

For a long time, elite accounting researchers could find no “empirical evidence” of widespread earnings management. All they had to do was look up from the computers where their heads were buried.
Bob Jensen --- http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm

“Research should be problem driven rather than methodologically driven," said Lisa Garcia Bedolla, a member of the task force who teaches at the University of California at Berkeley.
Scott Jascik --- http://www.insidehighered.com/news/2009/09/04/polisci  

"I understand your point, Jim." He could not identify one issue that (accountics) researchers had been able to "put to bed" after all that effort.
P. Kothari, one of the Editors of JAE and a full professor at MIT, as quoted by Jim Peters below.

Do we forecast? You bet. Do we have confidence in our forecasts? Never! Confidence about a non-linear chaotic system can only come in degrees, and even those degrees of confidence are guesses. Not all hope is lost. There are times when it seems our ability to predict is better than others. Thus we need to take advantage of it if we see it. Trading ranges, pivot points, support and resistance, and the like can help, and do help the trader.
Michael Covel, Trading Black Swans, September 2009 --- http://www.michaelcovel.com/pdfs/swan.pdf

The second is the comment that Joan Robinson made about American Keynsians: that their theories were so flimsy that they had to put math into them. In accounting academia, the shortest path to respectability seems to be to use math (and statistics), whether meaningful or not.
Professor Jagdish Gangolly, SUNY Albany

American Economist and Nobel Prize Winning Paul Samuelson died on December 13, 2009 ---
http://en.wikipedia.org/wiki/Paul_Samuelson
Among many other things, his textbook was perhaps the all-time best selling economics textbook. Students in my generation were weaned on Samuelson who, in my viewpoint, was a fence sitter, albeit a scholarly fence sitter, with respect to economic theory. He was a mathematician with hundreds of scholarly papers in his craft.

Stanislaw Ulam once challenged Samuelson to name one theory in all of the social sciences which is both true and nontrivial. Several years later, Samuelson responded with David Ricardo's theory of comparative advantage: That it is logically true need not be argued before a mathematician; that is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.

Probably be an accountant. I like to figure out stuff. In accounting, if you miss one number you get the whole thing wrong. You have to be perfect --- I'm a perfectionist.
Giovani Soto (catcher for the Chicago Cubs when asked what he'd like to be if he wasn't in professional baseball), as quoted in an interview with Mary Burns in Sports Illustrated, June 2008
Jensen Comment
If Soto only knew that accountants are second only to economists in terms of inaccuracies. When accountants total up the numbers on a balance sheet the total is always accurate, but the numbers being added up can be off by 1000% or more. Accuracy varies of course. Cash counts are highly accurate. Fixed assets, net of depreciation, are make-pretend within limits. Intangible asset valuations are about as accurate as ground eyesight measurements of floating cloud dimensions on a windy day. Accountants make highly inaccurate estimates of assets, liabilities, and equities. Then accountants change hats and chairs and add these estimates up very accurately and pretend that the total must mean something --- but accountants aren't sure what.

If Soto wants accuracy perhaps he should become a baseball statistician collecting up subjective estimates of the umpires. In the business world, accountants are the statisticians and the umpires. Therein lies the problem. An umpire decides what's a ball/strike, hit/foul, etc. and then leaves it up to baseball statisticians to book the numbers. In the world of business, accountants decide what are current versus deferred revenues, current versus capitalized costs, and additionally make highly subjective estimates about values of such things as forward contracts and interest rate swaps. After making their inaccurate estimates they then put on another hat, change chairs, and record their own estimates to the nearest penny. They're the business world's umpires and statisticians who simply change hats and chairs and wait for the investors to file lawsuits against them.

Humor about understanding research literature --- http://maaw.info/ArticleSummaries/ArtSumIngram87.htm
Thank you Rob Ingram and James Martin

Yale Rolls Out 10 New Courses – All Free --- Click Here
http://www.openculture.com/2011/04/yale_rolls_out_10_new_open_courses.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OpenCulture+%28Open+Culture%29

Walter Kaufmann’s Lectures on Nietzsche, Kierkegaard and Sartre (1960) --- Click Here
http://www.openculture.com/2011/04/walter_kaufmanns_lectures.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OpenCulture+%28Open+Culture%29

Bob Jensen's threads on free courses and/or course materials from prestigious universities ---
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI

Brief Very Long Summary of Accounting Theory

Bob Jensen at Trinity University

Warning 1:  Many of the links were broken when the FASB changed all of its links.  If a link to a FASB site does not work , Go to the new FASB link and search for the document.  The FASB home page is at http://www.fasb.org/ 

Warning 2:  The document below has not been updated for the FASB's Codification Database. Although the database is off to a great (albeit dumb, dumb, dumb) start, there is much information in this document and in prior FASB hard copy standards and in the FASB standards that cannot be found in the Codification Database. You can read the following at http://asc.fasb.org/asccontent&trid=2273304&nav_type=left_nav

Welcome to the Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (Codification).

The Codification is the result of a major four-year project involving over 200 people from multiple entities. The Codification structure is significantly different from the structure of existing accounting standards. The Notice to Constituents provides information you should read to obtain a good understanding of the Codification history, content, structure, and future consequences.

Click here to view the Notice to Constituents (Adobe Acrobat format).

Accounting, Fraud, and XBRL News --- #News

Daily News Sites for Accountancy, Tax, Fraud, IFRS, XBRL, Accounting History, and More ---
http://www.trinity.edu/rjensen/AccountingNews.htm

FASB's Accounting Standards Codification --- http://asc.fasb.org/home

Accounting for Derivative Financial Instruments and Hedging Activities
Bob Jensen's free tutorials and videos for FAS 133 and IAS 39 are at
http://www.trinity.edu/rjensen/caseans/000index.htm

Teaching Cases:  Hedge Accounting Scenario 1 versus Scenario 2
Two Teaching Cases Involving Southwest Airlines, Hedging, and Hedge Accounting Controversies ---
http://www.trinity.edu/rjensen/caseans/SouthwestAirlinesQuestions.htm

A nice timeline on the development of U.S. standards and the evolution of thinking about the income statement versus the balance sheet is provided at:
"The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (1930-1973)," by Stephen A. Zeff, CPA Journal, January 2005 --- http://www.nysscpa.org/cpajournal/2005/105/infocus/p18.htm
Part II covering years 1974-2003 published in February 2005 --- http://www.nysscpa.org/cpajournal/2005/205/index.htm 

**************************

“Accounting for Business Firms versus Accounting for Vegetables” ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews 

Take the Enron Quiz ---
http://www.trinity.edu/rjensen/FraudEnronQuiz.htm

Where I Made My Consulting Money and How

Accounting History in a Nutshell

Re-branding the CPA Profession

History of Accountics

Accounting Theory Courses

Thoughts on Bill Paton and Some Other Historical Writers in Accountancy

"Why Accounting Matters," by Edith Orenstein

Accounting for the Shadow Economy

Behavioral and Cultural Economics and Finance

Media Reporting Controversies

Efficient Markets (EMH) versus Inefficient Markets
(including Black Swans and Fat Tails)

Islamic and Social Responsibility Accounting

Key Differences Between International (IFRS) and U.S. GAAP (SFAS)

Accounting Research Versus the Accountancy Profession
Some ideas for applied research

Learning at Research Schools Versus "Teaching Schools" Versus "Happiness"
With a Side Track into Substance Abuse

Why must all accounting doctoral programs be social
science (particularly econometrics) "accountics" doctoral programs?
Why accountancy doctoral programs are drying up and
why accountancy is no longer required for admission or
graduation in an accountancy doctoral program
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms
 

GMAT: Paying for Points

Accounting Journal Lack of Interest in Publishing Replications

Rankings of Academic Accounting Research Journals and Schools

Role of Accounting Standards in Efficient Equity Markets

Controversies in Setting Accounting Standards

Popular IFRS, IAS, and Other IASB Learning Resources:

Bright Lines Versus Principles-Based Rules

Comparisons of IFRS with Domestic Standards of Many Nations
http://www.iasplus.com/country/compare.htm

Should "principles-based" standards replace more detailed requirements for complex
financial contracts such as structured financing contracts and financial instruments derivatives contracts?

Why Let the I.R.S. See What the S.E.C. Doesn't?

Radical Changes in Financial Reporting

The Controversy Between OCI versus Current Earnings

Accrual Accounting and Estimation 

Controversy Over  the SEC's Rule 144a

Cookie Jar Accounting and FAS 106

Why do sales discounts have such high annual percentage rates?

FIN 48 Liability if Transaction Is Later Disallowed by the IRS

Controversy Over FAS 2 versus IAS 38 on Research and Development (R&D)

Management ((Managerial) and Cost Accounting

Creative Earnings Management, Agency Theory, and Accounting Manipulations to Cook the Books 

Goodwill Impairment Issues 

Purchase Versus Pooling: The Never Ending Debate

Minority Interests:  Lambs being led to slaughter?

Off-Balance Sheet Financing (OBSF)

Insurance:  A Scheme for Hiding Debt That Won't Go Away

How do we account for lifetime warranties?

Disclosure provisions aimed at financing receivables
and Other Dislcosure Issues

CDOs: A Securitization Scheme for Hiding Debt That Won't Go Away

Pensions and Post-retirement benefits:  Schemes for Hiding Debt 

Leases:  A  Scheme for Hiding Debt That Won't Go Away 

Accounting for Executory Contracts Such as
Purchase/Sale Commitments and Loan Commitments

Debt Versus Equity (including shareholder earn-out contracts)

Synthetic Assets and Liabilities Accounting  

Time versus Money

Intangibles and Contingencies:   Theory Disputes Focus Mainly on the Tip of the Iceberg

Intangibles:  An Accounting Paradox

Intangibles:  Selected References On Accounting for Intangibles

EBR:  Enhanced Business Reporting (including non-financial information)

The Controversy Over Revenue Reporting and HFV 
--- http://www.trinity.edu/rjensen/ecommerce/eitf01.htm

The Controversy Over Employee Stock Options as Compenation  

Accounting for Options to Buy Real Estate

The Controversy over Accounting for Securitizations and Loan Guarantees  

The Controversy Over Pro Forma Reporting

Triple-Bottom (Social, Environmental) Reporting  

The Sad State of Government (Governmental) Accounting and Accountability

The Cost Conundrum:  What a Texas town can teach us about health care

Which is More Value-Relevant: Earnings or Cash Flows?

LIFO Sucks Teaching Case on LIFO Layers in Years of Rising Prices

The Controversy Over Fair Value (Mark-to-Market) Financial Reporting

Underlying Bases of Balance Sheet Valuation

Online Resources for Business Valuations
See http://www.trinity.edu/rjensen/roi.htm

Fade, Gain, and Cost Shifting Analysis  in gross profit analysis in construction accounting

Critical Thinking:  Why's It So Hard to Teach

Understanding the Issues 

Issues of Auditor Professionalism and Independence 
http://www.trinity.edu/rjensen/fraud001.htm#Professionalism

Quality of Earnings, Restatements, and Core Earnings

Sale-Leaseback Accounting Controversies
http://www.trinity.edu/rjensen/ecommerce/eitf01.htm#SaleLeasback

Economic Theory of Accounting (including Game Theory)

Socionomics Theory of Finance and Fraud

Facts Based on Assumptions:  The Power of Postpositive Thinking

Critical Postmodern Theory --- http://www.uta.edu/huma/illuminations/

Mike Kearl's great social theory site

What's Right and What's Wrong With SPEs, SPVs, and VIEs --- 
http://www.trinity.edu/rjensen//theory/00overview/speOverview.htm

Peter, Paul, and Barney: An Essay on 2008 U.S. Government Bailouts of Private Companies ---
http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads on GAAP comparisons (with particular stress upon derivative financial
instruments accounting rules) are at http://www.trinity.edu/rjensen/caseans/canada.htm
The above site also links to more general GAAP comparison guides between nations.

Implications of Bad Auditing on Capital Markets
and Client's Cost of Captial
http://www.trinity.edu/rjensen/FraudConclusion.htm#IncompetentAudits

Bob Jensen's threads on corporate governance are at
http://www.trinity.edu/rjensen/fraud.htm#Governance

Accounting Theory Courses

Modern Science and Ancient Wisdom  --- http://www.trinity.edu/rjensen/theory01.htm#AncientWisdom

"A Wisdom 101 Course!" February 15, 2010 ---
http://www.simoleonsense.com/a-wisdom-101-course/

"Overview of Prior Research on Wisdom," Simoleon Sense, February 15, 2010 ---
http://www.simoleonsense.com/overview-of-prior-research-on-wisdom/

"An Overview Of The Psychology Of Wisdom," Simoleon Sense, February 15, 2010 ---
http://www.simoleonsense.com/an-overview-of-the-psychology-of-wisdom/

"Why Bayesian Rationality Is Empty, Perfect Rationality Doesn’t Exist, Ecological Rationality Is Too Simple, and Critical Rationality Does the Job,"
Simoleon Sense, February 15, 2010 --- Click Here
http://www.simoleonsense.com/why-bayesian-rationality-is-empty-perfect-rationality-doesn%e2%80%99t-exist-ecological-rationality-is-too-simple-and-critical-rationality-does-the-job/

Great Minds in Management:  The Process of Theory Development --- http://www.trinity.edu/rjensen//theory/00overview/GreatMinds.htm

Great Minds in Sociology ---
http://www.sociosite.net/topics/sociologists.php
Also see Also see http://www.sociologyprofessor.com/ 

A Special Tribute to My Open Sharing Friend Will Yancey ---
http://www.trinity.edu/rjensen/Yancey.htm

Giving Stuff Away Free on the Internet ---
http://www.trinity.edu/rjensen/ListservRoles.htm#Free 

A Course in Game Theory ---
http://www.simoleonsense.com/a-course-in-game-theory-martin-j-osborne/

"Saturn (Now Defunct Automobile): A Wealth of Lessons from Failure," University of Pennsylvania's Knowledge@Wharton, October 28, 2009 --- http://knowledge.wharton.upenn.edu/article.cfm?articleid=2366

"Cornell Theory Center Aids Social Science Researchers," PR Web, June 19, 2006 --- http://www.prweb.com/releases/2006/6/prweb400160.htm

"The Ph.D. Problem On the professionalization of faculty life, doctoral training, and the academy’s self-renewal," by Louis Menand, Harvard Magazine, November/December 2009 ---
http://www.trinity.edu/rjensen/HigherEdControversies.htm#DoctoralProgramChange

How Do Scholars Search? --- http://www.trinity.edu/rjensen/Searchh.htm#Scholars

Some of the many, many lawsuits settled by auditing firms can be found at http://www.trinity.edu/rjensen/Fraud001.htm

Higher Education Controversies ---
http://www.trinity.edu/rjensen/HigherEdControversies.htm

Wonderful Video on the History and Controversies of Logical Positivism (Vienna Circle) and Philosophy of Science
Pragmatism under William James --- http://en.wikipedia.org/wiki/William_James
Metaphysics --- http://en.wikipedia.org/wiki/Metaphysics
Logical Positivism under Karl Popper --- http://en.wikipedia.org/wiki/Karl_Popper
Logical Positivism under Sir Alfred Jules (A.J.) Ayer --- http://en.wikipedia.org/wiki/Alfred_Ayer

• Interview with Sir Alfred Jules (A.J.) Ayer (Section 1) ---  http://www.youtube.com/watch?v=DMlXmLbGKJY
• Interview with Sir Alfred Jules (A.J.) Ayer (Section 2) ---- http://www.youtube.com/watch?v=QQS9fFg0cGY
• Interview with Sir Alfred Jules (A.J.) Ayer (Section 3) ---- http://www.youtube.com/watch?v=ip6p6Y7IUrE
• Interview with Sir Alfred Jules (A.J.) Ayer (Section 4) ---- http://www.youtube.com/watch?v=4cnRJGs08hE&feature=related
  Link forwarded by Jagdish Gangolly
   
• What happened when Ayer cleverly encountered prize fighter Mike Tyson?
  http://www.associatedcontent.com/article/268510/when_mike_tyson_met_aj_ayer.html?cat=60
  Link forwarded by Roger Collins
   
• A Lecture on Logical Positivism --- http://www.youtube.com/watch?v=HjBOuycK7uI
• Summary of Links --- http://www.youtube.com/results?search_type=search_playlists&search_query=Ayer+on+Logical+Positivism%3A

The philosophy of leadership, management, and theory development --- http://www.trinity.edu/rjensen/theory/00overview/GreatMinds.htm

574 Shields Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

• With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier
• With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams
• With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR
• With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

574 Shields Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
by Bob Jensen

Table of Contents

• Tom Lehrer on Mathematical Models and Statistics 
• TAR versus AMR
• Introduction to Replication Commentaries
• TAR Versus JEC
• Accounting Research Versus Social Science Research
• Mathematical Analytics in Plato's Cave TAR Researchers Playing by Themselves in an Isolated Dark Cave That the Sunlight Cannot Reach
• High Hopes Dashed for a Change in Policy of TAR Regarding Commentaries on Previously Published Research
• Rejoinder from the Current Senior Editor of TAR, Steven J. Kachelmeier
• Conclusion and Recommendation for a Journal Named Supplemental Commentaries and Replication Abstracts
• Appendix 1: Business Firms and Business School Teachers Largely Ignore TAR Research Articles
• Appendix 2: Integrating Academic Research Into Undergraduate Accounting Courses
• Appendix 3: Audit Pricing in the Real World
• Appendix 4: Replies from Jagdish Gangolly and Paul Williams

Steven J. Kachelmeier's July 2011 Editorial as Departing Senior Editor of The Accounting Review (TAR)

"Introduction to a Forum on Internal Control Reporting and Corporate Debt," by Steven J. Kachelmeier, The Accounting Review, Vol. 86, No. 4, July 2011 pp. 1129–113 (not free online) ---
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000004001129000001&idtype=cvips&prog=normal

One of the more surprising things I have learned from my experience as Senior Editor of The Accounting Review is just how often a ‘‘hot topic’’ generates multiple submissions that pursue similar research objectives. Though one might view such situations as enhancing the credibility of research findings through the independent efforts of multiple research teams, they often result in unfavorable reactions from reviewers who question the incremental contribution of a subsequent study that does not materially advance the findings already documented in a previous study, even if the two (or more) efforts were initiated independently and pursued more or less concurrently. I understand the reason for a high incremental contribution standard in a top-tier journal that faces capacity constraints and deals with about 500 new submissions per year. Nevertheless, I must admit that I sometimes feel bad writing a rejection letter on a good study, just because some other research team beat the authors to press with similar conclusions documented a few months earlier. Research, it seems, operates in a highly competitive arena.

Fortunately, from time to time, we receive related but still distinct submissions that, in combination, capture synergies (and reviewer support) by viewing a broad research question from different perspectives. The two articles comprising this issue’s forum are a classic case in point. Though both studies reach the same basic conclusion that material weaknesses in internal controls over financial reporting result in negative repercussions for the cost of debt financing, Dhaliwal et al. (2011) do so by examining the public market for corporate debt instruments, whereas Kim et al. (2011) examine private debt contracting with financial institutions. These different perspectives enable the two research teams to pursue different secondary analyses, such as Dhaliwal et al.’s examination of the sensitivity of the reported findings to bank monitoring and Kim et al.’s examination of debt covenants.

Both studies also overlap with yet a third recent effort in this arena, recently published in the Journal of Accounting Research by Costello and Wittenberg-Moerman (2011). Although the overall ‘‘punch line’’ is similar in all three studies (material internal control weaknesses result in a higher cost of debt), I am intrigued by a ‘‘mini-debate’’ of sorts on the different conclusions reache  by Costello and Wittenberg-Moerman (2011) and by Kim et al. (2011) for the effect of material weaknesses on debt covenants. Specifically, Costello and Wittenberg-Moerman (2011, 116) find that ‘‘serious, fraud-related weaknesses result in a significant decrease in financial covenants,’’ presumably because banks substitute more direct protections in such instances, whereas Kim et al. Published Online: July 2011 (2011) assert from their cross-sectional design that company-level material weaknesses are associated with more financial covenants in debt contracting.

In reconciling these conflicting findings, Costello and Wittenberg-Moerman (2011, 116) attribute the Kim et al. (2011) result to underlying ‘‘differences in more fundamental firm characteristics, such as riskiness and information opacity,’’ given that, cross-sectionally, material weakness firms have a greater number of financial covenants than do non-material weakness firms even before the disclosure of the material weakness in internal controls. Kim et al. (2011) counter that they control for risk and opacity characteristics, and that advance leakage of internal control problems could still result in a debt covenant effect due to internal controls rather than underlying firm characteristics. Kim et al. (2011) also report from a supplemental change analysis that, comparing the pre- and post-SOX 404 periods, the number of debt covenants falls for companies both with and without material weaknesses in internal controls, raising the question of whether the

Costello and Wittenberg-Moerman (2011) finding reflects a reaction to the disclosures or simply a more general trend of a declining number of debt covenants affecting all firms around that time period. I urge readers to take a look at both articles, along with Dhaliwal et al. (2011), and draw their own conclusions. Indeed, I believe that these sorts . . .

Continued in article

Jensen Comment
Without admitting to it, I think Steve has been embarrassed, along with many other accountics researchers, about the virtual absence of validation and replication of accounting science (accountics) research studies over the past five decades. For the most part, accountics articles are either ignored or accepted as truth without validation. Behavioral and capital markets empirical studies are rarely (ever?) replicated. Analytical studies make tremendous leaps of faith in terms of underlying assumptions that are rarely challenged (such as the assumption of equations depicting utility functions of corporations).

Accounting science thereby has become a pseudo science where highly paid accountics professor referees are protecting each others' butts ---
"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm
The above link contains Steve's rejoinders on the replication debate.

In the above editorial he's telling us that there is a middle ground for validation of accountics studies. When researchers independently come to similar conclusions using different data sets and different quantitative analyses they are in a sense validating each others' work without truly replicating each others' work.

I agree with Steve on this, but I would also argue that these types of "validation" is too little to late relative to genuine science where replication and true validation are essential to the very definition of science. The types independent but related research that Steve is discussing above is too infrequent and haphazard to fall into the realm of validation and replication.

When's the last time you witnesses a TAR author criticizing the research of another TAR author (TAR does not publish critical commentaries)?
Are TAR articles really all that above criticism?
Even though I admire Steve's scholarship, dedication, and sacrifice, I hope future TAR editors will work harder at turning accountics research into real science!

What Went Wrong With Accountics Research? --- http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm

"History, Not Politics," by Serena Golden, Inside Higher Ed, May 21, 2010 ---
http://www.insidehighered.com/news/2010/05/21/spence

Jonathan Spence came here to deliver a speech, but don't let that fool you: his address -- the 39th Annual Jefferson Lecture in the Humanities, which took place Thursday -- in no way resembled the sort typically associated with D.C.

The Jefferson Lecture is sponsored by the National Endowment for the Humanities, which describes the lecture as "the most prestigious honor the federal government bestows for distinguished intellectual achievement in the humanities." Those chosen for the distinction are typically academics or creative types (or both) -- but, given the setting, the sponsor, and the nature of the award (which "recognizes an individual... who has the ability to communicate the knowledge and wisdom of the humanities in a broad, appealing way"), Jefferson Lecturers have historically taken the opportunity to make a larger (and sometimes tacitly political) point related to the humanities. Last year, controversial bioethicist Leon Kass used his lecture to criticize the way the humanities are taught and researched at American universities; in 2007, Harvey Mansfield argued, with many subtle political allusions, that the social sciences are in dire need of "the help of literature and history"; Tom Wolfe's 2006 lecture discussed how the humanities shed light on modern culture (and lamented the current state of that culture on campuses); 2005 lecturer Donald Kagan and 2004 lecturer Helen Vendler offered opposing views on which disciplines of the humanities are most crucial, and why.

If any of those in the crowd (noticeably larger than last year's) at the Warner Theater last night were familiar with the Jefferson Lectures of years prior, they were in for a surprise.

Spence is Sterling Professor of History Emeritus at Yale University, whose faculty he joined in 1966. His specialty has always been China -- his 14 books on Chinese history include 1990's The Search for Modern China, upon whose publication the New York Times accurately predicted that it would "undoubtedly become a standard text on the subject" -- and his lecture was entitled "When Minds Met: China and the West in the Seventeenth Century." Even this relatively specific appellation, however, conveys a misleading breadth, for Spence's lecture focused almost exclusively on three men -- Shen Fuzong, an exceptionally learned Chinese traveler; Thomas Hyde, an English scholar of history and language; and Robert Boyle, also English, a scientist and philosopher of considerable renown -- and one year: 1687.

In his lecture, Spence gave what may (or may not) have been one brief acknowledgment that he'd chosen an unusually narrow topic of discourse: "It is a commonplace, I think, that the sources that underpin our concept of the humanities, as a focus for our thinking, are expected to be broadly inclusive." But, for himself, Spence dismissed that notion in one more sentence: "...as a historian I have always been drawn to the apparently small-scale happenings in circumscribed settings, out of which we can tease a more expansive story."

Thus he dedicated the rest of his lecture to the story of those three historical figures in the year 1687. Shen had traveled to Europe in the company of one of his teachers, a Flemish Jesuit priest who was co-editing a book of the sayings of Confucius from Chinese into Latin. Hyde, librarian at the University of Oxford's Bodleian Library, invited Shen there to assist him with the cataloging of some Chinese books -- and also because Hyde, who in that era would have been called an Orientalist, wanted to learn Chinese himself. After a brief stay at Oxford, Shen returned to London, bearing a letter of introduction from Hyde to his friend Boyle; the letter recommended that Boyle meet and converse with the Chinese scholar. The letter had to be convincing, Spence explained, because Boyle's reputation was by then widespread, and "he was so inundated with curious visitors that at times he had to withdraw into self-enforced seclusion...."

Shen did meet Boyle at least once; Boyle's work diary mentions their discussion of the Chinese language and its scholars (a conversation that, like all of those between Shen and Hyde, must have taken place in Latin: Shen's Latin was excellent, but he did not, evidently, know English). And Hyde maintained correspondence not only with his old friend Boyle -- over the years, the two had "discussed Arabic and Persian texts, Malay grammars... and how to access books from Tangier, Constantinople and Bombay" as well as "the chemical constituents of sal ammoniac and amber, the effectiveness of certain Mexican herbs... current studies of human blood and air, the nature of papyrus, the writings of Ramon Llull and the use of elixirs and alchemy in the treatment of illnesses" -- but also with Shen, until around the time of the latter's departure from England for Portugal in the spring of 1688.The letters between Shen and Hyde covered such topics as "Chinese vocabulary... China's units of weights and measurements... the workings of the Chinese examination system and bureaucracy... [and] the Chinese Buddhist belief in the transmigration of souls."

"All three men," Spence ultimately concluded, "though so different, shared certain basic ideas about human knowledge: these included... the importance of linguistic precision, the need for broad-based comparative studies, the role of clarity in argument, the need for thorough scrutiny of philosophical and theological principles.... Theirs, though brief, had been a real meeting of the minds. And the values they shared remain, well over three hundred years later, the kind that we can seek to practice even in our own hurried lives."

That final point was the closest Spence came to suggesting a particular take-home message for his audience; however, in an interview with Inside Higher Ed, held that morning in the lobby of the Willard Hotel, he did mention a few ideas that he was hoping to convey. For one thing, Spence said, given the current importance of U.S.-China relations, he hopes this much older, smaller-scale example of dialogue between the East and West will "give some perspective to that."

"Historians," he said, "try to get people away from just focusing on the present; they try to give them some sort of stronger sense of continuity, human continuity. And I just like the range of things, these three people that draw together, and they're writing their letters to each other, and their few meetings... and in that short time they talk about examination systems, they talk about language, competition, they talk about medicine, they talk about -- I was fascinated, they talk about chess..... All these things seemed to me to flow together, and I think they'd make an interesting -- I hope they'd make an interesting -- package about cultural contact."

There's a message in that, Spence said: "to make our range of contact as wide as possible, and to use our intelligence about how to do this."

Another issue raised in the lecture, Spence said -- "maybe a small point, but perhaps worth making" -- has to do with the teaching and learning of languages; Hyde dreamed of bringing native speakers of various Eastern languages to Oxford, to establish a college of languages. "Why should everybody else on the planet speak English?" Spence asked. "I mean, why should they?"

But on the larger importance of the humanities, and their current status in higher education and society at large, Spence was reluctant to make a strong argument. "It's not just a case of encouraging humanities in the abstract; it's having something to say.... The main search should be for what is the most meaningful thing you can achieve with the humanities, how can you share some kind of broader cultural values, or how can you learn things about yourself or other societies. The challenge is to use the humane intelligence and see what can be built on that."

And when it comes to funding, "any government has to put its priorities somewhere, and this does usually mean cutting something."

His lecture, Spence said, isn't "meant to be exactly a political speech, you know, I hope people understand that."

For the most part, those in attendance seemed more than satisfied. Spence's talk was punctuated frequently by warm laughter from the audience -- whom he indulged shamelessly, often departing from his prepared remarks to expound upon details that interested him, or to make additional jokes whenever the crowd found one of his remarks especially humorous. When he finished, the applause was long and loud, and one woman remarked audibly, "That was amazing!"; her companion replied, "Nice, really nice!"

But at least a few people reacted with more ambivalence. One group of young attendees, who identified themselves as fans of Spence, having been students of his as undergraduates at Yale, said that while they'd enjoyed the lecture, they had been hoping that Spence would make a more explicit connection between his topic and issues of current cultural or political relevance. One noted that, in his introductory remarks that evening, NEH Chairman James Leach had described the purpose of the Jefferson Lecture as being "to narrow the gap between the world of academia and public affairs," and had emphasized the Endowment's goal of "bridging cultures."

There was an "irony," this young man said, in the fact that Spence's lecture precisely addressed the bridging of two cultures, but Spence hadn't made a bridge between his own remarks -- which the audience member interpreted as "a clarion call for better scholarship" -- and any other realm. "Listeners," he said (possibly referring to himself), "want something that's cut and dry, that's tweetable."

The possibility of such complaints about his speech had arisen during Inside Higher Ed's interview with Spence that morning; he hadn't seemed concerned. "I'm not going to sort of over-apologize to the audience... they've chosen to come to hear about the seventeenth century" -- he chuckled -- "I think we announced that!"

History of the CMA Examination and Revisions

October 30, 2010 message from James Martin

For an update and history of the CMA program see VanZante, N. R. 2010. IMA's
professional certification program has changed. Management Accounting
Quarterly (Summer): 48-51.

or my summary of VanZante's article at
http://maaw.info/ArticleSummaries/ArtSumVanZante2010.htm

The information provided in this paper is very similar to the information
provided by Brausch and Whitney earlier this year. However, VanZante adds a
chronological history of the CMA program and explains why the CFM exam was
discontinued and merged into the new CMA exam.

For more information see MAAW's professional exams section at
http://maaw.info/ProfessionalExamsMain.htm

Bob Jensen's threads on managerial accounting are at
http://www.trinity.edu/rjensen/theory01.htm#ManagementAccounting

Bob Jensen’s call for better research in the accounting academy ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

Bob Jensen's threads on accounting history are at
http://www.insidehighered.com/news/2010/05/21/spence

February 22, 2011 message from Gary Mueller

Hi, Bob + Erika -

We didn't get around to putting together our usual "annual report" this year. We did a fair bit of travel during the 2nd half of 2010, had a number of family get-togethers, and time got away from us. But thankfully we are reasonably healthy and well. Our major downsizing was a pain, but now we are glad we tackled it in 2009. How are you both? Hopefully you did not have to suffer through the cold, cold winter in the N.E.

Since you are both quite family oriented, I thought you might be interested in the completion of my professional biography by Dale Flesher at Ole Miss. I am very happy with the outcome. So I am enclosed the flyer about the book in the attachment hereto.

Be well and keep warm! Best greetings and regards,

Gary & Coralie

Jensen Comment
Although the above message from Gary Mueller is somewhat personal, I thought readers might like to hear from Gary and to know about the recent biography about Gary that was written by accounting historians Dale Flesher and Gary Previts:

Gerhard G. Mueller: Father of International Accounting Education
By Dale L. Flesher and Gary Previts
 Excerpts --- Click Here
 http://snipurl.com/Garymueller
 http://books.google.com/books?id=AJVMGhLy-sEC&pg=PR9&lpg=PR9&dq=Flesher+Biography+%22Gerhard+Mueller%22&source=bl&ots=ke6Ixd4eYY&sig=caAPec9xbxIALLaj0pdfOXSW3Ww&hl=en&ei=2qBjTYD2JcSAlAeOmd3gCw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBkQ6AEwAA#v=onepage&q=Flesher%20Biography%20%22Gerhard%20Mueller%22&f=false

Although I've known Gary and Coralie for years, we became much closer in the years that we were both on the Executive Committee of the American Accounting Association. Because there was significant outside funding for our EC meetings in those years, we had some wonderful trips with spouses to places like Amsterdam and Puerto Rico and Hawaii. When we met outside the U.S., Gary usually had a purpose. For example, when we met in Amsterdam he organized meetings where we interacted with leaders of European accounting education. Gary had more global contacts in accounting education than any person I've ever known other than the very, very long term serving international accounting professor Paul Garner.

These were exciting times for the Executive Committee because it was a time when the Big Eight accounting firms gave the AAA $4 million to establish the Accounting Education Change Commission ---
http://aaahq.org/AECC/history/cover.htm
Gary Mueller was instrumental in organizing the entire AECC Program.

For  36 years when Gary was at the University of Washington he was arguably the best known international accounting professor in the world. Gary grew up in Germany and was fluent in several languages (including difficult German dialects). In addition to his various books on international accounting, Gary chaired the doctoral dissertations of some outstanding international accounting students.

In addition to serving a AAA President, Gary was on the FASB for a full five year appointment before he retired.

Gary served the accounting profession and the Academy very well and was a mover and shaker in the globalization of accountancy.

My life is much richer for having served with Gary!

Accounting History
The September 2011 edition of The Accounting Review has some really interesting biographical book reviews and tributes to historical scholars ---
 

Anthony Hopwood (Deceased)
Gerhard G. Mueller
George J. Benston (Deceased)

CHRISTOPHER S. CHAPMAN, DAVID J. COOPER, and PETER B. MILLER (editors), Accounting, Organizations, and Institutions: Essays in Honour of Anthony Hopwood (Oxford, U.K.: Oxford University Press, 2009, ISBN 978-0-19-954635-0, pp. xi, 441) ---
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000005001835000001&idtype=cvips&prog=normal&bypassSSO=1

This collection of essays memorializes the life and work of Anthony Hopwood, a thought leader in management accounting research who was renowned for developing communities of accounting scholars. These essays, written by his students, co-authors, and colleagues, were presented to Anthony in a conference of international researchers. Thus, they have benefited from the counsel of the editors, from vigorous discussion among conference participants, and from reactions by Anthony himself. Consistent with Anthony’s distinguished career, in what may be his final research endeavor he contributed to the creation of a collection of serious scholarly works, worthy of consideration by all accounting researchers.

The volume is comprised of 18 chapters that collectively cover themes that animated Anthony’s work. Chief among these is the importance of studying accounting in the organizational and social contexts in which it operates, with an aim of understanding how accounting shapes and is shaped by its environment. In the introductory chapter, the editors delineate a tripartite schema of accounting, organizations, and institutions that guided their commissioning of pieces for the volume. Given the title of the journal that Anthony founded and edited for decades, Accounting, Organizations and Society (AOS), I wondered why the authors chose ‘‘institutions’’ over ‘‘societies’’ as the third element of the framework. In particular, I was curious about whether Anthony might in hindsight have preferred this, acknowledging the growing importance and use of institutional theory in accounting research. While the authors acknowledge the limitations of adhering too literally to the framework in light of indistinct conceptual boundaries (i.e., ‘‘to what extent is accounting itself an ‘institution’?’’, p. 2), they nonetheless argue convincingly for the usefulness of the framework in understanding a significant body of research that has been published in journals such as: AOS, Critical Perspectives on Accounting, and Accounting, Auditing and Accountability Journal. In Chapter 1, the editors provide a nice history and synthesis of these works. Although Anthony clearly played a major part in the genesis and intellectual development of the literature, the chapter is not a biographical sketch. It locates Anthony’s contributions in relation to other management scholars and in the context of current events and influential practitioner-led studies.

The editors conclude their history by reiterating Anthony’s concern: that much of the current-day neglect of accounting by social scientists stems from new modes of accountability in higher education that have been made operational through simplified, standardized performance metrics. Their hope is that these essays from ‘‘within and beyond’’ the discipline of accounting will reinvigorate research on accounting in its social context, and thereby address Anthony’s apprehension that ‘‘the only consumers of accounting research are other accounting researchers’’ (p. 22). Opting for a mix of ‘‘depth’’ strategy and ‘‘breadth’’ strategy for this review, I have selected one of the 17 contributed chapters for extensive comment and two others for brief summary.

Continued in article

DALE L. FLESHER, Gerhard G. Mueller: Father of International Accounting Education (Bingley, U.K.: Emerald Group Publishing Limited, 2010, ISBN 978-0-85724-333-1, pp. x, 222).
Scroll Down to Page 1838
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000005001835000001&idtype=cvips&prog=normal&bypassSSO=1

A biography, the title of which anoints its subject as the ‘‘Father of International Accounting Education,’’ raises two immediate questions. First, what exactly is international accounting and, second, what does it mean to be a ‘‘father’’ of an educational discipline?

The first question arises because it is not obvious as to what is international about international accounting. After all, the underlying concepts of accounting, like those of physics, are universal. The principles of accounting articulated by Fr. Luca Pacioli (often referred to as the ‘‘father of accounting’’) are no more confined to the boundaries of Italy than are the principles of physics described by Galileo. Yet it is doubtful that any academic physicists consider themselves specialists in ‘‘international physics.’’ ‘‘International accounting’’ is, at best, an ill-defined sub-discipline of accounting. To many—and probably to most U.S. accountants—international accounting is mainly a description of accounting practices in countries other than the United States. Needless to say, that definition would be unlikely to be embraced by our colleagues in those ‘‘other’’ countries. To others, international accounting deals primarily with measurement and reporting issues involving currency translation and related issues of consolidation. To still others, it pertains to the unique problems of controlling and auditing the accounting systems of multinational enterprises.

In his biography of Gerhard G. Mueller, Professor Dale L. Flesher never explicitly answers that first question. Yet it is apparent from the extraordinary length and breadth of Mueller’s publications that international accounting incorporated almost anything that involved entities outside of the United States. Indeed, he himself defined international accounting as ‘‘the producing, exchanging, using, and interpreting of accounting data across national borders’’ (p. 45).

As for the second question, what it means to be the ‘‘father’’ of international accounting education, Flesher concedes that Mueller was certainly not its biological father; others both wrote about and taught international accounting prior to him. But he leaves no doubt that Mueller adopted the discipline and can take credit for nurturing it up to adulthood.

. . .

Book review author Mike Granof states the following on Page 1841:
Flesher’s treatise leaves one significant question unanswered: Why has Gerhard Mueller not yet been elected to the Accounting Hall of Fame?

Continued in article

JAMES D. ROSENFELD (editor), The Selected Works of George J. Benston: Volume 2, Accounting and Finance (New York, NY: Oxford University Press, 2010, ISBN: 978- 0-19-538902-9, Vol. 2, pp. xviii, 426).
Scroll down to Page 1843
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000005001835000001&idtype=cvips&prog=normal&bypassSSO=1

This volume, which is edited by James D. Rosenfeld, the late George Benston’s friend and colleague at Emory University, consists of 16 articles arranged consecutively in two parts: nine accounting articles and seven finance articles. I will discuss all nine accounting articles in chronological order. I will then discuss two accounting articles that were omitted from the volume that were more highly cited than eight of the nine accounting articles included in the volume (source of citations: scholar.google.com as of February 10, 2011). Before beginning my discussion of the 11 articles, I opine that George Benston (hereafter, George) was one of the few and last Renaissance men of our profession, making numerous contributions to the accounting, finance, economics, and banking literatures.1 Indeed, while I focus on his contributions to accounting, George was best known for his expertise in banking, an area in which he was often cited by The Economist. As additional evidence of his expertise in banking, George was an Associate Editor of The Journal of Money, Credit, and Banking.2

Volume 1 of this two-volume collection covers George’s contributions to banking and financial services.

Continued in article

Jensen Comment
It saddens me that my friends Tony Hopwood and George Benston passed on. It thrills me, however, to still correspond with Gary Mueller. I was honored to serve on the Executive Committee when Gary was President of the American Accounting Association. The task fell upon Gary's shoulders to set up the Accounting Education Change Commission that received $4 million from the Big Eight to fund change in accounting education. We chose Gary's then colleague Gary Sundem to serve as CEO of the AECC.

Comparisons of IFRS with Domestic Standards of Many Nations
http://www.iasplus.com/country/compare.htm

More Detailed Differences (Comparisons) between FASB and IASB Accounting Standards

2011 Update

"IFRS and US GAAP: Similarities and Differences" according to PwC (2011 Edition)
http://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-and-us-gaap-similarities-and-differences.jhtml
Note the Download button!
Note that warnings are given throughout the document that the similarities and differences mentioned in the booklet are not comprehensive of all similarities and differences. The document is, however, a valuable addition to students of FASB versus IASB standard differences and similarities.

It's not easy keeping track of what's changing and how, but this publication can help. Changes for 2011 include:

• Revised introduction reflecting the current status, likely next steps, and what companies should be doing now
  (see page 2);
• Updated convergence timeline, including current proposed timing of exposure drafts, deliberations, comment periods, and final standards
  (see page 7);
• More current analysis of the differences between IFRS and US GAAP -- including an assessment of the impact embodied within the differences
  (starting on page 17); and
• Details incorporating authoritative standards and interpretive guidance issued through July 31, 2011
  (throughout).

This continues to be one of PwC's most-read publications, and we are confident the 2011 edition will further your understanding of these issues and potential next steps.

For further exploration of the similarities and differences between IFRS and US GAAP, please also visit our IFRS Video Learning Center.

To request a hard copy of this publication, please contact your PwC engagement team or contact us.

Jensen Comment
My favorite comparison topics (Derivatives and Hedging) begin on Page 158
The booklet does a good job listing differences but, in my opinion, overly downplays the importance of these differences. It may well be that IFRS is more restrictive in some areas and less restrictive in other areas to a fault. This is one topical area where IFRS becomes much too subjective such that comparisons of derivatives and hedging activities under IFRS can defeat the main purpose of "standards." The main purpose of an "accounting standard" is to lead to greater comparability of inter-company financial statements. Boo on IFRS in this topical area, especially when it comes to testing hedge effectiveness!

One key quotation is on Page 165

IFRS does not specifically discuss the methodology of applying a critical-terms match in the level of detail included within U.S. GAAP.
Then it goes yatta, yatta, yatta.

Jensen Comment
This is so typical of when IFRS fails to present the "same level of detail" and more importantly fails to provide "implementation guidance" comparable with the FASB's DIG implementation topics and illustrations.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

Bob Jensen's threads on accounting standards setting controversies ---
http://www.trinity.edu/rjensen/Theory01.htm#MethodsForSetting

 

"Canadian regulator decides against allowing early adoption of recent IFRSs by certain entities," IAS Plus, November 1, 2011 ---
http://www.iasplus.com/index.htm

. . .

In making its decision, the OSFI considered a number of factors such as industry consistency, OSFI policy positions on accounting and capital, operational capacity and resource constraints of Federally Regulated Entities (FREs), the ability to benefit from improved standards arising from the financial crisis and the notion of a level playing field with other Canadian and international financial institutions. OSFI concluded that FREs should not early adopt the following new or amended IFRSs, but instead should adhere to their mandatory effective dates:

Continued

 

Jensen Comment
The clients, auditors, and the AICPA clamoring that U.S. firms should be able to voluntarily choose IFRS instead of U.S. GAAP even before it has not been decided that IFRS will ever replace FASB standards seem to ignore the problems that voluntary choice of IFRS might cause for investors and analysts. The above reasoning by the OSFI makes sense to me.

But then outfits like the AICPA have a self-serving interest in earning millions of dollars selling IFRS training courses and materials.
 

November 2, 2011 reply from Patricia Walters

Does that mean you oppose options to early adopt standards in general, not just IFRSs?

Pat

 

November 2, 2011 reply from Bob Jensen

Hi Pat,

It's hard to say regarding early adoption of a particular national or international standard, because there can be unique circumstances. For example, FAS 123R simply altered how to make disclosures rather than alter the disclosures themselves since employee option expenses had to be disclosed before the FAS 123R adoption date. But even here early adoption of FAS 123R by Company A versus late adoption by Company B made simple comparisons of eps and P/E ratios between these companies less easy.

There's a huge difference between early adoption of a particular standard and early adoption of an entire system of standards like switching from FASB accounting standards to IFRS.

I think the Canadian position of early adoption of IFRS is probably correct because of the mess early adoption of IFRS makes with comparisons of companies using different accounting standards and the added costs of regulation of more than one set of standards. Also think of the added burden placed upon the courts to adjudicate disputes when differing sets of standards are being used.

Even though we allow IFRS for SEC registered foreign companies, I think it would be a total mess for the SEC, the PCAOB, investors, analysts, educators, trainers, auditing, and even the IRS (where tax and reporting treatments must sometimes be reconciled) if our domestic corporations could choose between FASB versus IASB standards.

There are hundreds of differences between FASB and IASB standards. Allowing companies domestic companies to cherry pick which system they choose before it is even known if there will ever be official replacement of FASB standards by IASB standards would be very, very confusing. What if there never is a decision to replace FASB standards? Do want to simply allow companies to choose to bypass FASB standards at their own discretion?

Of course, if information were costless it might be ideal to require financial reporting where FASB and IASB outcomes are reconciled. But clients and auditors generally contend that the cost of doing this greatly exceeds benefits. And teaching financial accounting would become exceedingly complicated if we had to teach two sets of standards on an equal basis.

I would certainly hate to face a CPA examination that had nearly equal coverage of both FASB and IASB standards simultaneously. I say this especially after viewing the hundreds of pages of complicated differences between the two standards systems.

Respectfully,
Bob Jensen

Comparisons of IFRS with Domestic Standards of Many Nations
http://www.iasplus.com/country/compare.htm

More Detailed Differences (Comparisons) between FASB and IASB Accounting Standards

2011 Update

"IFRS and US GAAP: Similarities and Differences" according to PwC (2011 Edition)
http://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-and-us-gaap-similarities-and-differences.jhtml
Note the Download button!
Note that warnings are given throughout the document that the similarities and differences mentioned in the booklet are not comprehensive of all similarities and differences. The document is, however, a valuable addition to students of FASB versus IASB standard differences and similarities.

It's not easy keeping track of what's changing and how, but this publication can help. Changes for 2011 include:

• Revised introduction reflecting the current status, likely next steps, and what companies should be doing now
  (see page 2);
• Updated convergence timeline, including current proposed timing of exposure drafts, deliberations, comment periods, and final standards
  (see page 7);
• More current analysis of the differences between IFRS and US GAAP -- including an assessment of the impact embodied within the differences
  (starting on page 17); and
• Details incorporating authoritative standards and interpretive guidance issued through July 31, 2011
  (throughout).

This continues to be one of PwC's most-read publications, and we are confident the 2011 edition will further your understanding of these issues and potential next steps.

For further exploration of the similarities and differences between IFRS and US GAAP, please also visit our IFRS Video Learning Center.

To request a hard copy of this publication, please contact your PwC engagement team or contact us.

Jensen Comment
My favorite comparison topics (Derivatives and Hedging) begin on Page 158
The booklet does a good job listing differences but, in my opinion, overly downplays the importance of these differences. It may well be that IFRS is more restrictive in some areas and less restrictive in other areas to a fault. This is one topical area where IFRS becomes much too subjective such that comparisons of derivatives and hedging activities under IFRS can defeat the main purpose of "standards." The main purpose of an "accounting standard" is to lead to greater comparability of inter-company financial statements. Boo on IFRS in this topical area, especially when it comes to testing hedge effectiveness!

One key quotation is on Page 165

IFRS does not specifically discuss the methodology of applying a critical-terms match in the level of detail included within U.S. GAAP.
Then it goes yatta, yatta, yatta.

Jensen Comment
This is so typical of when IFRS fails to present the "same level of detail" and more importantly fails to provide "implementation guidance" comparable with the FASB's DIG implementation topics and illustrations.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

I have a huge beef with the lack of illustrations in IFRS versus the many illustrations in U.S. GAAP.

Bob Jensen's threads on accounting standards setting controversies ---
http://www.trinity.edu/rjensen/Theory01.htm#MethodsForSetting

 

"Canadian regulator decides against allowing early adoption of recent IFRSs by certain entities," IAS Plus, November 1, 2011 ---
http://www.iasplus.com/index.htm

. . .

In making its decision, the OSFI considered a number of factors such as industry consistency, OSFI policy positions on accounting and capital, operational capacity and resource constraints of Federally Regulated Entities (FREs), the ability to benefit from improved standards arising from the financial crisis and the notion of a level playing field with other Canadian and international financial institutions. OSFI concluded that FREs should not early adopt the following new or amended IFRSs, but instead should adhere to their mandatory effective dates:

Continued

 

Jensen Comment
The clients, auditors, and the AICPA clamoring that U.S. firms should be able to voluntarily choose IFRS instead of U.S. GAAP even before it has not been decided that IFRS will ever replace FASB standards seem to ignore the problems that voluntary choice of IFRS might cause for investors and analysts. The above reasoning by the OSFI makes sense to me.

But then outfits like the AICPA have a self-serving interest in earning millions of dollars selling IFRS training courses and materials.
 

November 2, 2011 reply from Patricia Walters

Does that mean you oppose options to early adopt standards in general, not just IFRSs?

Pat

 

November 2, 2011 reply from Bob Jensen

Hi Pat,

It's hard to say regarding early adoption of a particular national or international standard, because there can be unique circumstances. For example, FAS 123R simply altered how to make disclosures rather than alter the disclosures themselves since employee option expenses had to be disclosed before the FAS 123R adoption date. But even here early adoption of FAS 123R by Company A versus late adoption by Company B made simple comparisons of eps and P/E ratios between these companies less easy.

There's a huge difference between early adoption of a particular standard and early adoption of an entire system of standards like switching from FASB accounting standards to IFRS.

I think the Canadian position of early adoption of IFRS is probably correct because of the mess early adoption of IFRS makes with comparisons of companies using different accounting standards and the added costs of regulation of more than one set of standards. Also think of the added burden placed upon the courts to adjudicate disputes when differing sets of standards are being used.

Even though we allow IFRS for SEC registered foreign companies, I think it would be a total mess for the SEC, the PCAOB, investors, analysts, educators, trainers, auditing, and even the IRS (where tax and reporting treatments must sometimes be reconciled) if our domestic corporations could choose between FASB versus IASB standards.

There are hundreds of differences between FASB and IASB standards. Allowing companies domestic companies to cherry pick which system they choose before it is even known if there will ever be official replacement of FASB standards by IASB standards would be very, very confusing. What if there never is a decision to replace FASB standards? Do want to simply allow companies to choose to bypass FASB standards at their own discretion?

Of course, if information were costless it might be ideal to require financial reporting where FASB and IASB outcomes are reconciled. But clients and auditors generally contend that the cost of doing this greatly exceeds benefits. And teaching financial accounting would become exceedingly complicated if we had to teach two sets of standards on an equal basis.

I would certainly hate to face a CPA examination that had nearly equal coverage of both FASB and IASB standards simultaneously. I say this especially after viewing the hundreds of pages of complicated differences between the two standards systems.

Respectfully,
Bob Jensen

Bob Jensen's threads on accounting standard setting controversies ---
http://www.trinity.edu/rjensen/Theory01.htm#MethodsForSetting

Accounting in the 21st Century: : Re-Branding the CPA Profession

September 20, 2010 message from Bob Jensen

Hi Denny,

Yes, I could access the PwC re-branding video directly without having to log in:
http://www.pwc.ch/en/video.html?objects.mid=362&navigationid=3856

I do have a PwC Direct password, but I really doubt that the Switzerland link is using a cookie.

In any case the home page of PwC does not require any login --- http://www.pwc.com/
The video is now on this home page.

This takes me back to the days when Bob Eliott, eventually as President of the AICPA, was proposing great changes in the profession, including SysTrust, WebTrust, Eldercare Assurance, etc. For years I used Bob’s AICPA/KPMG videos as starting points for discussion in my accounting theory course. Bob relied heavily on the analogy of why the railroads that did not adapt to innovations in transportation such as Interstate Highways and Jet Airliners went downhill and not uphill. The railroads simply gave up new opportunities to startup professions rather than adapt from railroading to transportation.

Bob’s underlying assumption was that CPA firms could extend assurance services to non-traditional areas (where they were not experts but could hire new kinds of experts) by leveraging the public image of accountants as having high integrity and professional responsibility. That public image was destroyed by the many auditing scandals, notably Enron and the implosion of Andersen, that surfaced in the late 1990s and beyond ---
http://www.trinity.edu/rjensen/Fraud001.htm

This is a 1998 lecture given by Bob Eliott before his world (the lofty public perception of CPA firm integrity) collapsed ---
http://newman.baruch.cuny.edu/digital/saxe/saxe_1998/elliott_98.ht

The AICPA commenced initiatives on such things as Systrust. To my knowledge most of these initiatives bit the dust, although some CPA firms might be making money by assuring Eldercare services.

The counter argument to Bob Elliot’s initiatives is that CPA firms had no comparative advantages in expertise in their new ventures just as railroads had few comparative advantages in trucking and airline transportation industries, although the concept of piggy backing of truck trailers eventually caught on.

I still have copies of Bob’s great VCR tapes, but I doubt that these have ever been digitized. Bob could sell refrigerators to Eskimos.

September 21, 2010 reply from Roger Debreceny [roger@DEBRECENY.COM]

Isn't interesting that the pwc video has nothing at all to say about protection of the investor or maintenance of the public interest. It is all about value for the client. The client gets mentioned at least a dozen times -- investors and the public, zero times.

If these are truly the internalized values of the firm, we're sure to have more audit failures in coming years.

<sigh>

Roger

September 22, 2010 reply from Bob Jensen

Hi Roger,

 In 1998, Bob Elliott argued that financial audits were destined in the 21^st Century to be money losing assurance services ---
http://newman.baruch.cuny.edu/digital/saxe/saxe_1998/elliott_98.ht
This is a great lecture that can be debated in various accounting courses, notably AIS, Ethics, and Auditing courses.

Sarbox (Sarbanes, SOX) revived the profitability of financial audits but possibly not for long as worldwide lawsuits commence to take their toll on the auditing firms.
http://www.trinity.edu/rjensen/Fraud001.htm

A key point made by Bob Elliott is that expansion of assurance services (e.g., SysTrust and Eldercare) is levered on the public image of CPA firms’ high integrity and professional responsibility. After this shining public image of CPA firms’ integrity and professional responsibility was tarnished since the turn of the Century, the question becomes what comparative advantages do CPA firms have that gives them comparative advantage. If you believe Francine, there’s not much left for the largest auditing firms aside from an existing global network of offices, infrastructures, vast teams of lawyers, and whatever is left of a once-shining public image

Bob Jensen

September 22, 2010 reply from Francine McKenna re: The Auditors Blog [retheauditors@GMAIL.COM]

Bob, it's all about branding. If you look at what Deloitte now says on their new boilerplate legal language- they recently converted from Swiss Verein to UK private firm structure - you'll see that brand is king. "Deloitte is a brand..." It begins.

Deloitte has a consulting firm they never shed, PwC wants one bad and is counting on it to grow to pull the rest if the firm up. KPMG is trying to get back in. They were advertising their presence at Oracle Open World user conf. EY seems the only one laying low, but then again I predicted that. Time and money is being spent on lots of litigation and they have the whopper of the day-Lehman. Yes, we are back pre-2000 and no one is doing anything to stop it. In the UK the regulators and media are rattling sabers but in the US nada but me and a few others like Jim Peterson. The PCAOB has no powers to stop acquisitions like BearingPoint and Diamond by PwC that distract them and waste resources that should be spent on training and quality assurance.

Francine

Bob Jensen's threads on auditor independence and professional responsibility ---
http://www.trinity.edu/rjensen/Fraud001.htm#Professionalism

Bob Jensen's threads on auditor independence and professional responsibility ---
http://www.trinity.edu/rjensen/Fraud001.htm#Professionalism

History of Accountics

Accountics is the mathematical science of values.
Charles Sprague [1887] as quoted by McMillan [1998, p. 1][NH1] 
 

Hi Pat,

Interestingly, the term “accountics” was coined by a Civil War veteran (badly wounded) who practiced accounting in the 19^th Century in New York City. He also taught accounting at both Columbia College (now Columbia University) and New York University.

In a 2007 Accounting Historians Journal article, I simply revived the term after nearly 80 years of dormancy ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm

But accounting history buffs should note that the term “accountics” was a big deal between 1887 and 1925. In particular, heated debates arose regarding whether The Accounting Review should commence in 1925 as an accountics journal for mathematical economists or as a journal for accounting teachers and practitioners.

You can read the following at http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm   

TAR BETWEEN 1926 AND 1955: IGNORING ACCOUNTICS

Accountics is the mathematical science of values.
Charles Sprague [1887] as quoted by McMillan [1998, p. 1][NH1] 

 

Accounting professor Charles Sprague of Columbia University (then called Columbia College) coined the word "accountics" in 1887. The word is not used today in accounting and has some alternative meanings outside our discipline. However, in the early 20^th century, accountics was the centerpiece of some unpublished lectures by Sprague. McMillan [1998, p. 11] stated the following:

These claims were not a pragmatic strategy to legitimize the development of sophisticated bookkeeping theories. Rather, this development of a science was seen as revealing long-hidden realities within the economic environment and the double-entry bookkeeping system itself. The science of accounts, through systematic mathematical analysis, could discover hidden thrust of the reality of economic value. The term “accountics” captured the imagination of the members of the IA, connoting advances in bookkeeping that all these men were experiencing.

 

By 1900, there was a journal called Accountics [Forrester, 2003]. Both the journal and the term “accountics” had short lives, but the belief that mathematical analysis and empirical research can “discover hidden thrust of the reality of economic value” (see above)  underlies much of what has been published in TAR over the past three decades. Hence, we propose reviving the term “accountics” to describe the research methods and quantitative analysis tools that have become popular in TAR and other leading accounting research journals. We essentially define accountics as equivalent to the scientific study of values in what Zimmerman [2001, p. 414] called “agency problems, corporate governance, capital asset pricing, capital budgeting, decision analysis, risk management, queuing theory, and statistical audit analysis.”

The American Association of University Instructors of Accounting, which in December 1935 became the American Accounting Association, commenced unofficially in 1915 [Zeff, 1966, p. 5]. It was proposed in October of 1919 that the Association publish a Quarterly Journal of Accountics. This proposed accountics journal never got off the ground as leaders in the Association argued heatedly and fruitlessly about whether accountancy was a science. A quarterly journal called The Accounting Review was subsequently born in 1925, with its first issue being published in March of 1926. Its accountics-like attributes did not commence in earnest until the 1960s.

Practitioner involvement, in a large measure, was the reason for changing the name of the Association by removing the words “of University Instructors.” Practitioners interested in accounting education participated actively in AAA meetings. TAR articles in the first several decades were devoted heavily to education issues and accounting issues in particular industries and trade groups. Research methodologies were mainly normative (without mathematics), case study, and archival (history) methods. Anecdotal evidence and hypothetical illustrations ruled the day. The longest serving editor of TAR was a practitioner named Eric Kohler, who determined what was published in TAR between 1929 and 1943. In those years, when the AAA leadership mandated that TAR focus on the development of accounting principles, publications were oriented to both practitioners and educators, Chatfield [1975, p. 4].

Following World War II, practitioners outnumbered educators in the AAA [Chatfield 1975, p. 4]. Leading partners from accounting firms took pride in publishing papers and books intended to inspire scholarship among professors and students. Over the years, some practitioners, particularly those with scholarly publications, were admitted into the Accounting Hall of Fame founded by The Ohio State University. Prior to the 1960s, accounting educators were generally long on practical experience and short on academic credentials such as doctoral degrees.

A major catalyst for change in accounting research occurred when the Ford Foundation poured millions of dollars into the study of collegiate business schools and the funding of doctoral programs and students in business studies. Gordon and Howell [1959] reported that business faculty in colleges lacked research skills and academic esteem when compared to their colleagues in the sciences. The Ford Foundation thereafter provided funding for doctoral programs and for top quality graduate students to pursue doctoral degrees in business and accountancy. The Foundation even funded publication of selected doctoral dissertations to give doctoral studies in business more visibility. Great pressures were also brought to bear on academic associations like the AAA to increase the scientific standards for publications in journals like TAR.

TAR BETWEEN 1956 AND 1985: NURTURING OF ACCOUNTICS

A perfect storm for change in accounting research arose in the late 1950s and early1960s. First came the critical Pierson Carnegie Report [1959] and the Gordon and Howell Ford Foundation Report [1959]. Shortly thereafter, the AACSB introduced a requirement requiring that a certain percentage of faculty possess doctoral degrees for business education programs seeking accreditation [Bricker and Previts, 1990]. Soon afterwards, both a doctorate and publication in top accounting research journals became necessary for tenure [Langenderfer, 1987].

A second component of this perfect storm for change was the proliferation of mainframe computers, the development of analytical software (e.g., early SPSS for mainframes), and the dawning of management and decision “sciences.” The third huge stimulus for changed research is rooted in portfolio theory discovered by Harry Markowitz in1952 that became the core of his dissertation at Princeton University, which  was published in book form in 1959. This theory eventually gave birth to the Nobel Prize winning Capital Asset Pricing Model (CAPM) and a new era of capital market research. A fourth stimulus was when the CRSP stock price tapes became available from the University of Chicago. The availability of CRSP led to a high number of TAR articles on capital market event studies (e.g., earnings announcements on trading prices and volumes) covering a period of nearly 40 years.

This “perfect storm” roared into nearly all accounting and finance research and turned academic accounting research into an accountics-centered science of values and mathematical/statistical analysis. After 1960, there was a shift in TAR, albeit slow at first, toward preferences for quantitative model building --- econometric models in capital market studies, time series models in forecasting, advanced calculus information science, information economics, analytical models, and psychometric behavioral models. Chatfield [1975, p. 6] wrote the following:

Beginning in the 1960s the Review published many more articles by non-accountants, whose contribution involved showing how ideas or methods from their own discipline could be used to solve particular accounting problems. The more successful adaptations included matrix theory, mathematical model building, organization theory, linear programming, and Bayesian analysis.

 

TAR was not alone in moving toward a more quantitative focus. Accountics methodologies accompanied similar quantitative model building preferences in finance, marketing, management science, decision science, operations research, information economics, computer science, and information systems. Early changes along these lines began to appear in other leading research journals between 1956-1965, with some mathematical modeling papers noted by Dyckman and Zeff [1984, p. 229]. Fleming, Graci and Thompson [2000, p. 43] documented additional emphasis on quantitative methodology between 1966 and 1985. In particular, they note how tenure requirements began to change and asserted the following:

The Accounting Review evolved into a journal with demanding acceptance standards whose leading authors were highly educated accounting academics who, to a large degree, brought methods and tools from other disciplines to bear upon accounting issues.

 

A number of new academic accountancy journals were launched in the early 1960s, including the Journal of Accounting Research (1963), Abacus (1965) and The International Journal of Accounting Education and Research (1965). Clinging to its traditional normative roots and trade-article style would have made TAR appear to be a journal for academic luddites. Actually, many of the new mathematical approaches to theory development were fundamentally normative, but they were couched in the formidable language and rigors of mathematics. Publication of papers in traditional normative theory, history, and systems slowly ground to almost zero in the new age of accountics.

These new spearheads in accountics were not without problems. It is both humorous and sad to go back and discover how naïve and misleading some of TAR’s bold and high risk thrusts were in quantitative methods. Statistical models were employed without regard to underlying assumptions of independence, temporal stationarity, multicollinearity, homoscedasticity, missing variables, and departures from the normal distribution. Mathematical applications were proposed for real-world systems that failed to meet continuity and non-convexity assumptions inherent in models such as linear programming and calculus optimizations. Some proposed applications of finite mathematics and discrete (integer) programming failed because the fastest computers in the world, then and now, could not solve most realistic integer programming problems in less than 100 years.

After financial databases provided a beta covariance of each security in a portfolio with the market portfolio, many capital market events studies were published by TAR and other leading accounting journals. In the early years, accounting researchers did not challenge the CAPM’s assumptions and limitations --- limitations that, in retrospect, cast doubt upon many of the findings based upon any single index of market risk [Fama and French, 1992].

Leading accounting professors lamented TAR’s preference for rigor over relevancy [Zeff, 1978; Lee, 1997; and Williams, 1985 and 2003]. Sundem [1987] provides revealing information about the changed perceptions of authors, almost entirely from academe, who submitted manuscripts for review between June 1982 and May 1986. Among the 1,148 submissions, only 39 used archival (history) methods; 34 of those submissions were rejected. Another 34 submissions used survey methods; 33 of those were rejected. And 100 submissions used traditional normative (deductive) methods with 85 of those being rejected. Except for a small set of 28 manuscripts classified as using “other” methods (mainly descriptive empirical according to Sundem), the remaining larger subset of submitted manuscripts used methods that Sundem [1987, p. 199] classified these as follows:

292          General Empirical

172          Behavioral

135          Analytical modeling

119          Capital Market

  97          Economic modeling

  40          Statistical modeling

  29          Simulation

 

It is clear that by 1982, accounting researchers realized that having mathematical or statistical analysis in TAR submissions made accountics virtually a necessary, albeit not sufficient, condition for acceptance for publication. It became increasingly difficult for a single editor to have expertise in all of the above methods. In the late 1960s, editorial decisions on publication shifted from the TAR editor alone to the TAR editor in conjunction with specialized referees and eventually associate editors [Flesher, 1991, p. 167]. Fleming et al. [2000, p. 45] wrote the following:

The big change was in research methods. Modeling and empirical methods became prominent during 1966-1985, with analytical modeling and general empirical methods leading the way. Although used to a surprising extent, deductive-type methods declined in popularity, especially in the second half of the 1966-1985 period.

 

We were surprised that there was no reduction in accountics dominance in TAR since 1986 in spite of changes in the environment such as the explosion of communications networking, interacting relational databases, and sophisticated accounting information systems (AIS).Virtually no AIS papers were published in TAR between 1986 and 2005. This practice was changed in 2006 by the appointment of a new AIS associate editor to encourage publication of some AIS papers that often do not fit neatly into the accountics mold. In an interesting aside, we note that the AAA has become a leading international association of accounting educators. Sundem [1987] reported that about 12 percent of the manuscripts submitted came from outside of North America. The American Accounting Association is an international association that provides publication opportunities to all members, and manuscripts are submitted from many parts of the world. In our opinion, this contributed significantly to the rise in accountics studies worldwide.

A major change at TAR took place in the 1980s with the creation of new AAA journals to relieve TAR of publishing articles that were less accountics-oriented. Prior to 1983, TAR was the leading academic journal for teachers of accounting as well as practitioners. Numerous TAR papers appeared on how to improve accounting education and teaching. In an effort to better serve educators, the AAA created a specialty journal called Issues in Accounting Education, first published in 1983. A journal aimed more at issues facing practitioners was inaugurated in 1987 under the name Accounting Horizons. Around this time, the AAA also granted permission for specialty “sections” to be formed for sub-disciplines of accounting, which resulted in additional new journals. These new journals allowed TAR to focus more heavily on quantitative papers that became increasingly difficult for practitioners and many teachers of accounting to comprehend.

Fleming et al. [2000, p. 48] report that education articles in TAR declined from 21 percent in 1946-1965 to 8 percent in 1966-1985. Issues in Accounting Education began to publish the education articles in 1983. Garcha, Harwood, and Hermanson [1983] reported on the readership of TAR before any new specialty journals commenced in the AAA. They found that among their AAA membership respondents, only 41.7 percent would subscribe to TAR if it became unbundled in terms of dollar savings from AAA membership dues. This suggests that TAR was not meeting the AAA membership’s needs. Based heavily upon the written comments of respondents, the authors’ conclusions were, in part, as follows by Garcha, Harwood, and Hermanson [1983, p. 37]:

The findings of the survey reveal that opinions vary regarding TAR and that emotions run high. At one extreme some respondents seem to believe that TAR is performing its intended function very well. Those sharing this view may believe that its mission is to provide a high-quality outlet for those at the cutting-edge of accounting research. The pay-off for this approach may be recognition by peers, achieving tenure and promotion, and gaining mobility should one care to move. This group may also believe that trying to affect current practice is futile anyway, so why even try?


 

At the other extreme are those who believe that TAR is not serving its intended purpose. This group may believe TAR should serve the readership interests of the audiences identified by the Moonitz Committee. Many in the intended audience cannot write for, cannot read, or are not interested in reading the Main Articles which have been published during approximately the last decade. As a result there is the suggestion that this group believes that a change in editorial policy is needed.

 

After a study by Abdel-khalik [1976] revealed complaints about the difficulties of following the increased quantitative terminology in TAR, editors did introduce abstracts at the beginning of the articles to summarize major findings with less jargon [Flesher, 1991, p. 169]. However, the problem was simultaneously exacerbated when TAR stopped publishing commentaries and rebuttals that sometimes aided comprehension of complicated research. Science journals often are much better about encouraging commentaries, replications, and rebuttals.
 

TAR BETWEEN 1986 AND 2005: MATURATION OF ACCOUNTICS

We pointed out earlier in Table 2 how the numbers of authors having five or more appearances in twenty-year time spans has markedly declined over the entire 80-year life of TAR. Table 4 lists the most recent top authors for the 1986-2005 period. In contrast to Heck and Bremser [1986] findings, the likelihood that any single author will have more than five appearances is greatly reduced in more recent times.

Continued at http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm   

Ockham’s (or Occam's) Razor (Law of Parsimony and Succinctness) --- http://en.wikipedia.org/wiki/Ockham's_razor

"Razoring Ockham’s razor," by Massimo Pigliucci, Rationally Speaking, May 6, 2011 ---
http://rationallyspeaking.blogspot.com/2011/05/razoring-ockhams-razor.html

Scientists, philosophers and skeptics alike are familiar with the idea of Ockham’s razor, an epistemological principle formulated in a number of ways by the English Franciscan friar and scholastic philosopher William of Ockham (1288-1348). Here is one version of it, from the pen of its originator:

 

Frustra fit per plura quod potest fieri per pauciora. [It is futile to do with more things that which can be done with fewer] (Summa Totius Logicae)

 

Philosophers often refer to this as the principle of economy, while scientists tend to call it parsimony. Skeptics invoke it every time they wish to dismiss out of hand claims of unusual phenomena (after all, to invoke the “unusual” is by definition unparsimonious, so there).

 

There is a problem with all of this, however, of which I was reminded recently while reading an old paper by my colleague Elliot Sober, one of the most prominent contemporary philosophers of biology. Sober’s article is provocatively entitled “Let’s razor Ockham’s razor” and it is available for download from his web site.

 

Let me begin by reassuring you that Sober didn’t throw the razor in the trash. However, he cut it down to size, so to speak. The obvious question to ask about Ockham’s razor is: why? On what basis are we justified to think that, as a matter of general practice, the simplest hypothesis is the most likely one to be true? Setting aside the surprisingly difficult task of operationally defining “simpler” in the context of scientific hypotheses (it can be done, but only in certain domains, and it ain’t straightforward), there doesn’t seem to be any particular logical or metaphysical reason to believe that the universe is a simple as it could be.

 

Indeed, we know it’s not. The history of science is replete with examples of simpler (“more elegant,” if you are aesthetically inclined) hypotheses that had to yield to more clumsy and complicated ones. The Keplerian idea of elliptical planetary orbits is demonstrably more complicated than the Copernican one of circular orbits (because it takes more parameters to define an ellipse than a circle), and yet, planets do in fact run around the gravitational center of the solar system in ellipses, not circles.

 

Lee Smolin (in his delightful The Trouble with Physics) gives us a good history of 20th century physics, replete with a veritable cemetery of hypotheses that people thought “must” have been right because they were so simple and beautiful, and yet turned out to be wrong because the data stubbornly contradicted them.

 

In Sober’s paper you will find a discussion of two uses of Ockham’s razor in biology, George Williams’ famous critique of group selection, and “cladistic” phylogenetic analyses. In the first case, Williams argued that individual- or gene-level selective explanations are preferable to group-selective explanations because they are more parsimonious. In the second case, modern systematists use parsimony to reconstruct the most likely phylogenetic relationships among species, assuming that a smaller number of independent evolutionary changes is more likely than a larger number.

 

Part of the problem is that we do have examples of both group selection (not many, but they are there), and of non-parsimonious evolutionary paths, which means that at best Ockham’s razor can be used as a first approximation heuristic, not as a sound principle of scientific inference.

 

And it gets worse before it gets better. Sober cites Aristotle, who chided Plato for hypostatizing The Good. You see, Plato was always running around asking what makes for a Good Musician, or a Good General. By using the word Good in all these inquiries, he came to believe that all these activities have something fundamental in common, that there is a general concept of Good that gets instantiated in being a good musician, general, etc. But that, of course, is nonsense on stilts, since what makes for a good musician has nothing whatsoever to do with what makes for a good general.

 

Analogously, suggests Sober, the various uses of Ockham’s razor have no metaphysical or logical universal principle in common — despite what many scientists, skeptics and even philosophers seem to think. Williams was correct, group selection is less likely than individual selection (though not impossible), and the cladists are correct too that parsimony is usually a good way to evaluate competitive phylogenetic hypotheses. But the two cases (and many others) do not share any universal property in common.

 

What’s going on, then? Sober’s solution is to invoke the famous Duhem thesis.** Pierre Duhem suggested in 1908 that, as Sober puts it: “it is wrong to think that hypothesis H makes predictions about observation O; it is the conjunction of H&A [where A is a set of auxiliary hypotheses] that issues in testable consequences.”

 

This means that, for instance, when astronomer Arthur Eddington “tested” Einstein’s General Theory of Relativity during a famous 1919 total eclipse of the Sun — by showing that the Sun’s gravitational mass was indeed deflecting starlight by exactly the amount predicted by Einstein — he was not, strictly speaking doing any such thing. Eddington was testing Einstein’s theory given a set of auxiliary hypotheses, a set that included independent estimates of the mass of the sun, the laws of optics that allowed the telescopes to work, the precision of measurement of stellar positions, and even the technical processing of the resulting photographs. Had Eddington failed to confirm the hypotheses this would not (necessarily) have spelled the death of Einstein’s theory (since confirmed in many other ways). The failure could have resulted from the failure of any of the auxiliary hypotheses instead.

 

This is both why there is no such thing as a “crucial” experiment in science (you always need to repeat them under a variety of conditions), and why naive Popperian falsificationism is wrong (you can never falsify a hypothesis directly, only the H&A complex can be falsified).

 

What does this have to do with Ockham’s razor? The Duhem thesis explains why Sober is right, I think, in maintaining that the razor works (when it does) given certain background assumptions that are bound to be discipline- and problem-specific. So, for instance, Williams’ reasoning about group selection isn’t correct because of some generic logical property of parsimony (as Williams himself apparently thought), but because — given the sorts of things that living organisms and populations are, how natural selection works, and a host of other biological details — it is indeed much more likely than not that individual and not group selective explanations will do the work in most specific instances. But that set of biological reasons is quite different from the set that cladists use in justifying their use of parsimony to reconstruct organismal phylogenies. And needless to say, neither of these two sets of auxiliary assumptions has anything to do with the instances of successful deployment of the razor by physicists, for example.

Continued in article
Note the comments that follow

574 Shields Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm

• With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier
• With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams
• With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR
• With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Gaming for Tenure as an Accounting Professor ---
http://www.trinity.edu/rjensen/TheoryTenure.htm
(with a reply about tenure publication point systems from Linda Kidwell)

"So you want to get a Ph.D.?" by David Wood, BYU ---
http://www.byuaccounting.net/mediawiki/index.php?title=So_you_want_to_get_a_Ph.D.%3F

Do You Want to Teach? ---
http://financialexecutives.blogspot.com/2009/05/do-you-want-to-teach.html

Jensen Comment
Here are some added positives and negatives to consider, especially if you are currently a practicing accountant considering becoming a professor.

Accountancy Doctoral Program Information from Jim Hasselback ---
http://www.jrhasselback.com/AtgDoctInfo.html 

Why must all accounting doctoral programs be social science (particularly econometrics) "accountics" doctoral programs?
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

What went wrong in accounting/accountics research?
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW: 1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews

"The Accounting Doctoral Shortage: Time for a New Model,"
by Neal Mero, Jan R. Williams and George W. Krull, Jr. .
Issues in Accounting Education 24 (4)
http://aaapubs.aip.org/getabs/servlet/GetabsServlet?prog=normal&id=IAEXXX000024000004000427000001&idtype=cvips&gifs=Yes&ref=no

ABSTRACT:
The crisis in supply versus demand for doctorally qualified faculty members in accounting is well documented (Association to Advance Collegiate Schools of Business [AACSB] 2003a, 2003b; Plumlee et al. 2005; Leslie 2008). Little progress has been made in addressing this serious challenge facing the accounting academic community and the accounting profession. Faculty time, institutional incentives, the doctoral model itself, and research diversity are noted as major challenges to making progress on this issue. The authors propose six recommendations, including a new, extramurally funded research program aimed at supporting doctoral students that functions similar to research programs supported by such organizations as the National Science Foundation and other science-based funding sources. The goal is to create capacity, improve structures for doctoral programs, and provide incentives to enhance doctoral enrollments. This should lead to an increased supply of graduates while also enhancing and supporting broad-based research outcomes across the accounting landscape, including auditing and tax. ©2009 American Accounting Association

Bob Jensen's threads on accountancy doctoral programs are at
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

Steven J. Kachelmeier's July 2011 Editorial as Departing Senior Editor of The Accounting Review (TAR)

"Introduction to a Forum on Internal Control Reporting and Corporate Debt," by Steven J. Kachelmeier, The Accounting Review, Vol. 86, No. 4, July 2011 pp. 1129–113 (not free online) ---
http://aaapubs.aip.org/getpdf/servlet/GetPDFServlet?filetype=pdf&id=ACRVAS000086000004001129000001&idtype=cvips&prog=normal

One of the more surprising things I have learned from my experience as Senior Editor of The Accounting Review is just how often a ‘‘hot topic’’ generates multiple submissions that pursue similar research objectives. Though one might view such situations as enhancing the credibility of research findings through the independent efforts of multiple research teams, they often result in unfavorable reactions from reviewers who question the incremental contribution of a subsequent study that does not materially advance the findings already documented in a previous study, even if the two (or more) efforts were initiated independently and pursued more or less concurrently. I understand the reason for a high incremental contribution standard in a top-tier journal that faces capacity constraints and deals with about 500 new submissions per year. Nevertheless, I must admit that I sometimes feel bad writing a rejection letter on a good study, just because some other research team beat the authors to press with similar conclusions documented a few months earlier. Research, it seems, operates in a highly competitive arena.

Fortunately, from time to time, we receive related but still distinct submissions that, in combination, capture synergies (and reviewer support) by viewing a broad research question from different perspectives. The two articles comprising this issue’s forum are a classic case in point. Though both studies reach the same basic conclusion that material weaknesses in internal controls over financial reporting result in negative repercussions for the cost of debt financing, Dhaliwal et al. (2011) do so by examining the public market for corporate debt instruments, whereas Kim et al. (2011) examine private debt contracting with financial institutions. These different perspectives enable the two research teams to pursue different secondary analyses, such as Dhaliwal et al.’s examination of the sensitivity of the reported findings to bank monitoring and Kim et al.’s examination of debt covenants.

Both studies also overlap with yet a third recent effort in this arena, recently published in the Journal of Accounting Research by Costello and Wittenberg-Moerman (2011). Although the overall ‘‘punch line’’ is similar in all three studies (material internal control weaknesses result in a higher cost of debt), I am intrigued by a ‘‘mini-debate’’ of sorts on the different conclusions reache  by Costello and Wittenberg-Moerman (2011) and by Kim et al. (2011) for the effect of material weaknesses on debt covenants. Specifically, Costello and Wittenberg-Moerman (2011, 116) find that ‘‘serious, fraud-related weaknesses result in a significant decrease in financial covenants,’’ presumably because banks substitute more direct protections in such instances, whereas Kim et al. Published Online: July 2011 (2011) assert from their cross-sectional design that company-level material weaknesses are associated with more financial covenants in debt contracting.

In reconciling these conflicting findings, Costello and Wittenberg-Moerman (2011, 116) attribute the Kim et al. (2011) result to underlying ‘‘differences in more fundamental firm characteristics, such as riskiness and information opacity,’’ given that, cross-sectionally, material weakness firms have a greater number of financial covenants than do non-material weakness firms even before the disclosure of the material weakness in internal controls. Kim et al. (2011) counter that they control for risk and opacity characteristics, and that advance leakage of internal control problems could still result in a debt covenant effect due to internal controls rather than underlying firm characteristics. Kim et al. (2011) also report from a supplemental change analysis that, comparing the pre- and post-SOX 404 periods, the number of debt covenants falls for companies both with and without material weaknesses in internal controls, raising the question of whether the

Costello and Wittenberg-Moerman (2011) finding reflects a reaction to the disclosures or simply a more general trend of a declining number of debt covenants affecting all firms around that time period. I urge readers to take a look at both articles, along with Dhaliwal et al. (2011), and draw their own conclusions. Indeed, I believe that these sorts . . .

Continued in article

Jensen Comment
Without admitting to it, I think Steve has been embarrassed, along with many other accountics researchers, about the virtual absence of validation and replication of accounting science (accountics) research studies over the past five decades. For the most part, accountics articles are either ignored or accepted as truth without validation. Behavioral and capital markets empirical studies are rarely (ever?) replicated. Analytical studies make tremendous leaps of faith in terms of underlying assumptions that are rarely challenged (such as the assumption of equations depicting utility functions of corporations).

Accounting science thereby has become a pseudo science where highly paid accountics professor referees are protecting each others' butts ---
"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm
The above link contains Steve's rejoinders on the replication debate.

In the above editorial he's telling us that there is a middle ground for validation of accountics studies. When researchers independently come to similar conclusions using different data sets and different quantitative analyses they are in a sense validating each others' work without truly replicating each others' work.

I agree with Steve on this, but I would also argue that these types of "validation" is too little to late relative to genuine science where replication and true validation are essential to the very definition of science. The types independent but related research that Steve is discussing above is too infrequent and haphazard to fall into the realm of validation and replication.

When's the last time you witnesses a TAR author criticizing the research of another TAR author (TAR does not publish critical commentaries)?
Are TAR articles really all that above criticism?
Even though I admire Steve's scholarship, dedication, and sacrifice, I hope future TAR editors will work harder at turning accountics research into real science!

What Went Wrong With Accountics Research? --- http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong

"574 Shields Against Validity Challenges in Plato's Cave" --- http://www.trinity.edu/rjensen/TheoryTAR.htm

"History, Not Politics," by Serena Golden, Inside Higher Ed, May 21, 2010 ---
http://www.insidehighered.com/news/2010/05/21/spence

Jonathan Spence came here to deliver a speech, but don't let that fool you: his address -- the 39th Annual Jefferson Lecture in the Humanities, which took place Thursday -- in no way resembled the sort typically associated with D.C.

The Jefferson Lecture is sponsored by the National Endowment for the Humanities, which describes the lecture as "the most prestigious honor the federal government bestows for distinguished intellectual achievement in the humanities." Those chosen for the distinction are typically academics or creative types (or both) -- but, given the setting, the sponsor, and the nature of the award (which "recognizes an individual... who has the ability to communicate the knowledge and wisdom of the humanities in a broad, appealing way"), Jefferson Lecturers have historically taken the opportunity to make a larger (and sometimes tacitly political) point related to the humanities. Last year, controversial bioethicist Leon Kass used his lecture to criticize the way the humanities are taught and researched at American universities; in 2007, Harvey Mansfield argued, with many subtle political allusions, that the social sciences are in dire need of "the help of literature and history"; Tom Wolfe's 2006 lecture discussed how the humanities shed light on modern culture (and lamented the current state of that culture on campuses); 2005 lecturer Donald Kagan and 2004 lecturer Helen Vendler offered opposing views on which disciplines of the humanities are most crucial, and why.

If any of those in the crowd (noticeably larger than last year's) at the Warner Theater last night were familiar with the Jefferson Lectures of years prior, they were in for a surprise.

Spence is Sterling Professor of History Emeritus at Yale University, whose faculty he joined in 1966. His specialty has always been China -- his 14 books on Chinese history include 1990's The Search for Modern China, upon whose publication the New York Times accurately predicted that it would "undoubtedly become a standard text on the subject" -- and his lecture was entitled "When Minds Met: China and the West in the Seventeenth Century." Even this relatively specific appellation, however, conveys a misleading breadth, for Spence's lecture focused almost exclusively on three men -- Shen Fuzong, an exceptionally learned Chinese traveler; Thomas Hyde, an English scholar of history and language; and Robert Boyle, also English, a scientist and philosopher of considerable renown -- and one year: 1687.

In his lecture, Spence gave what may (or may not) have been one brief acknowledgment that he'd chosen an unusually narrow topic of discourse: "It is a commonplace, I think, that the sources that underpin our concept of the humanities, as a focus for our thinking, are expected to be broadly inclusive." But, for himself, Spence dismissed that notion in one more sentence: "...as a historian I have always been drawn to the apparently small-scale happenings in circumscribed settings, out of which we can tease a more expansive story."

Thus he dedicated the rest of his lecture to the story of those three historical figures in the year 1687. Shen had traveled to Europe in the company of one of his teachers, a Flemish Jesuit priest who was co-editing a book of the sayings of Confucius from Chinese into Latin. Hyde, librarian at the University of Oxford's Bodleian Library, invited Shen there to assist him with the cataloging of some Chinese books -- and also because Hyde, who in that era would have been called an Orientalist, wanted to learn Chinese himself. After a brief stay at Oxford, Shen returned to London, bearing a letter of introduction from Hyde to his friend Boyle; the letter recommended that Boyle meet and converse with the Chinese scholar. The letter had to be convincing, Spence explained, because Boyle's reputation was by then widespread, and "he was so inundated with curious visitors that at times he had to withdraw into self-enforced seclusion...."

Shen did meet Boyle at least once; Boyle's work diary mentions their discussion of the Chinese language and its scholars (a conversation that, like all of those between Shen and Hyde, must have taken place in Latin: Shen's Latin was excellent, but he did not, evidently, know English). And Hyde maintained correspondence not only with his old friend Boyle -- over the years, the two had "discussed Arabic and Persian texts, Malay grammars... and how to access books from Tangier, Constantinople and Bombay" as well as "the chemical constituents of sal ammoniac and amber, the effectiveness of certain Mexican herbs... current studies of human blood and air, the nature of papyrus, the writings of Ramon Llull and the use of elixirs and alchemy in the treatment of illnesses" -- but also with Shen, until around the time of the latter's departure from England for Portugal in the spring of 1688.The letters between Shen and Hyde covered such topics as "Chinese vocabulary... China's units of weights and measurements... the workings of the Chinese examination system and bureaucracy... [and] the Chinese Buddhist belief in the transmigration of souls."

"All three men," Spence ultimately concluded, "though so different, shared certain basic ideas about human knowledge: these included... the importance of linguistic precision, the need for broad-based comparative studies, the role of clarity in argument, the need for thorough scrutiny of philosophical and theological principles.... Theirs, though brief, had been a real meeting of the minds. And the values they shared remain, well over three hundred years later, the kind that we can seek to practice even in our own hurried lives."

That final point was the closest Spence came to suggesting a particular take-home message for his audience; however, in an interview with Inside Higher Ed, held that morning in the lobby of the Willard Hotel, he did mention a few ideas that he was hoping to convey. For one thing, Spence said, given the current importance of U.S.-China relations, he hopes this much older, smaller-scale example of dialogue between the East and West will "give some perspective to that."

"Historians," he said, "try to get people away from just focusing on the present; they try to give them some sort of stronger sense of continuity, human continuity. And I just like the range of things, these three people that draw together, and they're writing their letters to each other, and their few meetings... and in that short time they talk about examination systems, they talk about language, competition, they talk about medicine, they talk about -- I was fascinated, they talk about chess..... All these things seemed to me to flow together, and I think they'd make an interesting -- I hope they'd make an interesting -- package about cultural contact."

There's a message in that, Spence said: "to make our range of contact as wide as possible, and to use our intelligence about how to do this."

Another issue raised in the lecture, Spence said -- "maybe a small point, but perhaps worth making" -- has to do with the teaching and learning of languages; Hyde dreamed of bringing native speakers of various Eastern languages to Oxford, to establish a college of languages. "Why should everybody else on the planet speak English?" Spence asked. "I mean, why should they?"

But on the larger importance of the humanities, and their current status in higher education and society at large, Spence was reluctant to make a strong argument. "It's not just a case of encouraging humanities in the abstract; it's having something to say.... The main search should be for what is the most meaningful thing you can achieve with the humanities, how can you share some kind of broader cultural values, or how can you learn things about yourself or other societies. The challenge is to use the humane intelligence and see what can be built on that."

And when it comes to funding, "any government has to put its priorities somewhere, and this does usually mean cutting something."

His lecture, Spence said, isn't "meant to be exactly a political speech, you know, I hope people understand that."

For the most part, those in attendance seemed more than satisfied. Spence's talk was punctuated frequently by warm laughter from the audience -- whom he indulged shamelessly, often departing from his prepared remarks to expound upon details that interested him, or to make additional jokes whenever the crowd found one of his remarks especially humorous. When he finished, the applause was long and loud, and one woman remarked audibly, "That was amazing!"; her companion replied, "Nice, really nice!"

But at least a few people reacted with more ambivalence. One group of young attendees, who identified themselves as fans of Spence, having been students of his as undergraduates at Yale, said that while they'd enjoyed the lecture, they had been hoping that Spence would make a more explicit connection between his topic and issues of current cultural or political relevance. One noted that, in his introductory remarks that evening, NEH Chairman James Leach had described the purpose of the Jefferson Lecture as being "to narrow the gap between the world of academia and public affairs," and had emphasized the Endowment's goal of "bridging cultures."

There was an "irony," this young man said, in the fact that Spence's lecture precisely addressed the bridging of two cultures, but Spence hadn't made a bridge between his own remarks -- which the audience member interpreted as "a clarion call for better scholarship" -- and any other realm. "Listeners," he said (possibly referring to himself), "want something that's cut and dry, that's tweetable."

The possibility of such complaints about his speech had arisen during Inside Higher Ed's interview with Spence that morning; he hadn't seemed concerned. "I'm not going to sort of over-apologize to the audience... they've chosen to come to hear about the seventeenth century" -- he chuckled -- "I think we announced that!"

Robert Walker in New Zealand and I have been corresponding about how much of the core of an accounting theory course should be devoted to the main works of Professor Ijiri, especially his AAA Monographs --- http://aaahq.org/market/display.cfm?catID=5

Professor Ijiri was one on my doctoral studies professors, and I greatly admire his research and scholarship and devotion to mathematics ---
http://fisher.osu.edu/departments/accounting-and-mis/the-accounting-hall-of-fame/membership-in-hall/yuji-ijiri/

However, given the tradeoffs of the many topics that are important to accounting theory education, I think I would devote less time to Yuji’s works than would Robert Walker since I don’t think Yuji addressed many of our current theoretical problems. Robert Walker would pretty much begin and end an accounting theory course with the Ijiri monographs.

Robert Walker is a fine accounting historian and theorist who asked me to share the following with you.

I admit that my own interest in theory are probably wider. I’m also inclined with respect to accounting theory to also focus on issues of operations and implementation. We can always assume non-existent worlds filled with idealized inhabitants that we program. Andy way we like But that’s probably theory best left to economists.

I am not trying to operationalise ‘triple entry’ bookkeeping.  This is ijiri’s ‘bridge too far’ (even a genius, for that is what he is, can be mistaken).  Knowing the flaws of historical cost, he attempted to introduce a third element which accommodated the future (‘momentum’).  In doing so he violated the beauty of the algebraic formulation that double entry is

I have attempted to express ‘momentum’ in double entry form – that is, I don’t look to the AAA study on ‘triple entry bookkeeping’ (which, frankly, is nonsense and an abject failure) but to the alternative valuation analysis in Theory of Accounting Measurement.  The idea of ‘momentum’ is to try to predict the future from the past.  That is not possible because it pre-supposes that there is an essential continuity.  It cannot take account of what is now referred to as the ‘black swan’ phenomenon – the wholly unpredictable and unexpected event.  At best the accountant can only lay out the value propositions that are an attempt to predict the future and adjust them for discontinuities.  The arrival of the black swan is, hopefully, not so momentous an event as to over-whelm the entity whose accounting is being carried out.  The equity buffer is there for that purpose – to accommodate the unexpected.

For instance, even in the example of life insurance where actuarial practice is (a) most precise and (b) most certain (everybody dies) the actuary cannot take account of events that have not arisen before.  They cannot predict a plague which would fundamentally alter the stochastic data.  All they can do is introduce a prudential margin (see IAS36.30).  Even then it may not be enough and even then a dangerous thing to do as it under-states equity.

I would go so far as to say that concepts such as irrationality are not amenable to any real or sensible mathematical formulation.  If it cannot be expressed in that form it cannot be expressed in accounting notation.  It is therefore not the business of accounting.  Perhaps my theory of accounting, if it is a theory at all, ultimately teaches this – accounting needs to be much more modest in its ambition.  It deals only in money and money’s worth.  If it cannot, it is not practical to express it in money then it shouldn’t be expressed. 

Take your concern with contingent liability (or better provisional liability) it is simply absurd to predict the outcome of the judicial process when dealing in matters of tort (as you know these days that is how I make my living and I wouldn’t even attempt to quantify my future ‘winnings’).  A written narrative is all that you can hope to achieve in such matters.  If that understates liabilities, so be it.  As I say that is what equity (ownership interest) is for.

It might not surprise for me to claim that my theories are based in Friedrich Nietzsche.  Consider this:

I walk among men as among fragments of the future; of that future which I scan.

And it is all my art and aim, to compose into one and bring together that which is fragment, and riddle and dreadful chance.

 

You wish to read the ‘fragments of the future’.  A Promethean task I think.  You cannot ever deal with ‘dreadful chance’ until it is upon you.  Then all you can do is redeem it.  It is foolhardy even an act of hubris to think otherwise.  Accounting can never do what you want it to do.  In the end it is about limits, limits to ambition.

Robert (jensen)

PS I hope your wife is OK.  It is illness, on a human scale, that is ‘dreadful chance’.

PSS Your colleagues might consider, along with Ijiri, Nietzsche as the foundation to a course of theory. His book Beyond Good and Evil has a sub-title ‘Towards a Philosophy of the Future’.

Hi Robert (Walker),

I think I understand the swap, but I cannot connect to Ijiri with this illustration. The revaluations are given, but they do not relate to force or momentum. That would take a mathematical model of the future valuations, but this cannot be predicted. If it could there would be no swap. The party and the counterparty have different predictions of the future

I have begun to go back over all my many writings on the matter of accounting. I have decided to start publishing this material on my website and I will do so progressively over the next few weeks and months.

The first offering is an essay I wrote as a submission to what is now NZICA on the occasion of a restructure in about 1992.

For those of you who have read my messages over the last decade or so you will see that I am a musician with a single score in my repertoire. Or less self deprecatingly I have had a consistent message for what is now becoming decades rather than years.

Was I listened to back then? I doubt it. Was I right in what I said? My answer to that may surprise.

Please read it and circulate it. I am slightly uneasy about pushing people to read what I write. It seems so egotistical. But then that would be true of all writers or would-be writers.

http://www.robertbwalker.co.nz/documents/archives 

Here’s an expanded view of questions raised about which constituencies credit rating agencies (and by analogy auditing firms) really serve.

A message forwarded by my anonymous friend Larry on October 18, 2009

How Moody's sold its ratings -- and sold out investors | McClatchy ---
http://www.mcclatchydc.com/politics/story/77244.html
Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

"In 2001, Moody's had revenues of $800.7 million; in 2005, they were up to $1.73 billion; and in 2006, $2.037 billion. The exploding profits were fees from packaging . . . and for granting the top-class AAA ratings, which were supposed to mean they were as safe as U.S. government securities," said Lawrence McDonald in his recent book, "A Colossal Failure of Common Sense."

Nobody cared about due diligence so long as the money kept pouring in during the housing boom. Moody's stock peaked in February 2007 at more than $72 a share.

Billionaire investor Warren Buffett's firm Berkshire Hathaway owned 15 percent of Moody's stock by the end of 2001, company reports show. That stake, largely still intact, meant that the Oracle from Omaha reaped huge financial rewards while Moody's overlooked the glaring problems in pools of subprime mortgages.

A Berkshire spokeswoman had no comment.

Moody's wasn't alone in ignoring the mounting problems. It wasn't even first among competitors. The financial industry newsletter Asset-Backed Alert found that Standard & Poor's participated in 1,962 deals in 2006 involving pools of loans, while Moody's did 1,697. In 2005, Standard & Poor's did 1,754 deals to Moody's 1,120. Fitch was well behind both.

http://www.mcclatchydc.com/politics/story/77244.html

Jensen Comment
I’m frantically searching the writings of my very technical hero, Janet Tavakoli, to discover that all this is not true about my other hero, Warren Buffett. Of course there are huge unknowns, at this point in time, and varying degrees of culpability.

Janet is pretty rough on the ratings agencies in her writings. However, she’s always kind to Warren. One of my all-time favorite books is her Dear Mr. Buffet book. On Page 107, Janet writes as follows:

At the end of 2007, Berkshire Hathaway owned 78 million shares of Moody’s Corporation, one of the top three rating agencies (the same shares owned when I first met Warren Buffett in 2005), representing just over 19 percent of the capital stock. The cot basis of the shares is $499 million. At the end of 200, the value was just under $1 billion. By the end of 2006, the value was around $3.3 billion, but it dropped to $1.7 billion at the end of 2007. The sharp increase in revenues is due chiefly to revenues generated from rating structured financial products, and the sharp decrease was due to the disillusionment of the market with the integrity of the ratings.

On Page 109, Janet continues to berate the rating agency cartel (where I think it might be possible to substitute auditors for rating agencies interchangeably):

The rating agencies seem to not care about the market’s forgiveness since not only have they not apologized ---  a necessary but not sufficient condition --- they seem to feel the market should change. Specifically, the market should change its point of view about what it expects from the rating agencies. Yet it seems that the market has the right to expect rating agencies to follow the basic principles of statistics.

The tactic has mainly been successful because the rating agencies act as a cartel, leveraging their joint power to have fees magically converge and have ratings so similar that they have participated overrating AAA structured products backed by dodgy loans in 2007 that took substantial principal losses. Meanwhile, many market professionals, including me, pointed out in print that the AAA ratings were maeaningless. The rating agencies presented a farily united front in defending their methods (except for Fitch, which also participated on overrated CDOs and later seemed more responsive to downgrading structured products.

. . .

“Ma and pa” retail investors found that AAA product ended up in their pension funds and mutual funds because their money managers gave too much credence to an AAA rating.

But nowhere have I yet found where Janet alludes to any insider profiteering on the part of Warren Buffett who also lost billions of dollars in the crash The difference between “ma and pa” and Mr. Buffet is that a billion dollars is pocket change to Warren Buffet. He can easily recoup his losses legitimately in trades with stupid hedge fund managers and bankers that rely too much on fallible models (at least that’s what mathematician Janet Tavakoli tells us in a very enlightening way).

Expert Financial Predictions (Jon Stewart's hindsight video scrapbook) --- http://www.technologyreview.com/blog/post.aspx?bid=354&bpid=23077&nlid=1840
You have to watch the first third of this video before it gets into the scrapbook itself
The problem unmentioned here is one faced by auditors and credit rating agencies of risky clients every day:  Predictions are often self fulfilling
If an auditor issues going concern exceptions in audit reports, the exceptions themselves will probably contribute to the downfall of the clients
The same can be said by financial analysts who elect to trash a company's financial outlook
Hence we have the age-old conflict between holding back on what you really secretly predict versus pulling the fire alarm on a troubled company
There are no easy answers here except to conclude that it auditors and credit rating agencies appeared to not reveal many of their inner secret predictions in 2008
Auditing firms and credit rating agencies lost a lot of credibility in this economic crisis, but they've survived many such stains on their reputations in the past
By now we're used to the fact that the public is generally aware of the fire before the auditors and credit rating agencies pull the alarm lever
On the other hand, financial wizards who pull the alarm lever on nearly every company all the time lose their credibility in a hurry

Video:  Warren Buffett's Secrets To Success --- http://www.businessinsider.com/business-news/nov-24-alice1-2009-11 '

Bob Jensen's threads on credit rating agencies are at
http://www.trinity.edu/rjensen/FraudRotten.htm#CreditRatingAgencies

Bob Jensen's threads on auditor professionalism are at
http://www.trinity.edu/rjensen/fraud001.htm#Professionalism

FASB Codification Database Supersedes All FASB Standards

Countdown to Codification Alert:  FASB Alert #4, 5-22-09

What happens to U.S. GAAP literature when the Codification went live on July 1, 2009?
All existing standards that were used to create the Codification will become superseded upon the adoption of the Codification.  The FASB will no longer update and maintain the superseded standards. Also, upon adoption of the Codification, the U.S. GAAP hierarchy will flatten from five levels to two­authoritative and non-authoritative.  The following table illustrates the result:

 
DON’T BE CAUGHT OFF GUARD!  GET READY FOR THE CODIFICATION!
 
The FASB instituted a major change in the way accounting standards are organized. The FASB Accounting Standards Codification^TM is expected to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP).   After final approval by the FASB only one level of authoritative GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC). All other literature will be non-authoritative.
 
While the FASB Codification is designed to make it much easier to research accounting issues, the transition to use of the Codification will require some advance training.  These weekly “Countdown to Codification” alerts are designed to provide tips to make that transition easier.
 
The FASB offers a free online tutorial at http://asc.fasb.org.  A recorded instructional webcast­The Move to Codification of US GAAP, first presented live on March 13, 2008­also is available at http://www.fasb.org/fasb_webcast_series/index.shtml. In addition, Codification training opportunities are offered through professional accounting organizations such as the American Institute of Certified Public Accountants (AICPA).

For the PwC Codification Guide I snipped the URL to
http://snipurl.com/ifrs-litevsheavy

The original link is at
http://www.pwc.com/en_GX/gx/ifrs-reporting/pdf/Sims_diffs_IFRS_SMEs.pdf

Deloitte’s Codification helpers are linked at
http://www.iasplus.com/usa/fasb/0906codification.pdf

The following message was forwarded by David Albrecht on June 16, 2009

From: "Tracey E. Sutherland" <traceysutherland@aaahq.org>
Organization: American Accounting Association
Date: Tue, 16 Jun 2009 17:25:23 -0400

FAF and AAA to Provide FASB Codification to Faculty and Students

On July 1, 2009, the Financial Accounting Standards Board (FASB) is instituting a major change in the way accounting standards are organized. On that date, the FASB Accounting Standards Codification™ (FASB Codification) will become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (U.S. GAAP).  After that date, only one level of authoritative U.S. GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC).  All other literature will be non-authoritative.

As part of its educational mission, the Financial Accounting Foundation (FAF), the oversight and administrative body of the FASB, in a joint initiative with the American Accounting Association (AAA), will provide faculty and students in accounting programs at post-secondary academic institutions with the Professional View of the online FASB Codification.

Accounting Program Access—No Cost to Individual Faculty or Students
The Professional View of the FASB Codification will be accessible at no cost to individual faculty and students, through the AAA’s Academic Access program, available to Registered Accounting Programs.  The Professional View will provide advanced search functions with special utilities to assist in the navigation of content, representing the fully functional view of the FASB Codification that will be used by auditors, financial analysts, investors, and preparers of financial statements.  All of the features that have been available with the verification version currently at http://asc.fasb.org are included with the Professional View.
AAA Academic Access

The AAA will provide direct services to accounting departments through its Academic Access program; issuing authentication credentials for faculty and students through Registered Accounting Programs, at a low annual institutional fee of $150.  Information about this program will be forthcoming directly from AAA and on the AAA website at http://aaahq.org/FASB/Access.cfm.

Transitional Access—From July 1 through August 31, 2009
The AAA will provide credentials to individual faculty and students, at no charge, during the transition period before the beginning of the fall semester when faculty and students will receive credentials for access through their Registered Accounting Programs.

The FAF, FASB, and AAA are enthusiastic about this new initiative and understand the value of this program to accounting education and scholarship, in addition to its benefit to faculty and students to have access to the advanced view of U.S. GAAP that will be used by accounting professionals.


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The FASB home page is at http://www.fasb.org/home

June 24, 2009 Update
There was some doubt initially about whether the free or discounted faculty and student access version of the FASB Codification database would be the "Professional" version (that includes searching and cross-referencing at an $850 single user license per year).

The AAA registration site for the discounted ($150 annual discount price) version makes it clear that accounting education departments or schools will get the full "Professional" version at a discount, thereby saving each academic program $700 per year savings per license. What is not yet perfectly clear is whether this is a single-user access license. My reading is that multiple users within a department or school can use the Codification database at the same time. I could be wrong.

The AAA program enrollment site for this discounted version is http://aaahq.org/FASB/Access.cfm 
The form is at https://aaahq.org/AAAforms/FASB/enroll.cfm

Since all future financial statements will no longer reference hard copy sources like FAS 166 or EITF 98-1 or FIN 48, it is vital for students and teachers and researchers to have access to the Codification database for financial statement analysis.

Reasons why registration for the Codification database are important are given at http://www.cfo.com/article.cfm/13854787/c_2984368/?f=archives
Also see http://www.trinity.edu/rjensen/theory01.htm#MethodsForSetting

FREE access to ANNUAL REPORTS in XBRL --- http://www.trinity.edu/rjensen/XBRLandOLAP.htm#TimelineXBRL
From EDGAR Online --- http://www.tryxbrl.org/

Finance Test Questions --- http://financetestquestions.wikispaces.com/

Watch the Video
"Sometimes we can't see the forest for the trees," by Jim Mahar, FinanceProfessor Blog, May 27, 2009 --- http://financeprofessorblog.blogspot.com/2009/05/sometimes-we-cant-see-forest-for-trees.html

Part Behavioral finance, part cycling, and part a study in how the brain works, the following "Test" is eye opening at least.

We all get so caught up in seeing what we want to see that we sometimes miss the obvious. This effects us in many ways: In finance, if bullish (optimistic), we are more apt to see the good news, if bearish (pessimistic) you see only bad news.

That is one reason why big break throughs happen from those outside the field. It is one reason why sabbaticals and vacations are important. But it can also have important implications in many other ways.

Go ahead, take the test. It takes about a minute --- Click Here

You can order back issues or relevant links management and accounting books and journals from MAAW --- http://maaw.info/

Free Access to Back Issues of The Accounting Review --- http://maaw.info/TheAccountingReview.htm 

Bob Jensen's threads on special purpose (variable interest) entities are at http://www.trinity.edu/rjensen//theory/00overview/speOverview.htm

"Visualization of Multidimensional Data" --- http://www.trinity.edu/rjensen/352wpVisual/000DataVisualization.htm 

Bob Jensen's threads on XBRL are at http://www.trinity.edu/rjensen/XBRLandOLAP.htm#XBRLextended 

Accounting for Electronic Commerce, Including Controversies on Business Valuation, ROI, and Revenue Reporting --- http://www.trinity.edu/rjensen/ecommerce.htm 

Comparisons of International IAS Versus FASB Standards --- http://www.deloitte.com/dtt/cda/doc/content/pocketiasus.pdf 

This is a Good Summary of Various Forms of Business Risk  ---
http://en.wikipedia.org/wiki/Risk_management

1. Enterprise Risk Management

2. Credit Risk

3. Market Risk

4. Operational Risk

5. Business Risk

6. Other Types of Risk?

I think a case can be made that the IASB is becoming more Bayesian as tests of credit risk of cash flow impairments become weighted by subjective probability distributions. Hence we have to dredge up more of the old Bayesian theory for students if the IASB heads full bore into using subjective probability distributions for credit impairment, fair value, etc. Reverend Bayes may be smiling down on the FASB. I am not so enthusiastic about how it will help investors to add this subjectivity to financial reporting ---
http://www.iasplus.com/dttletr/1007amortcost.pdf 

"Beyond Bayes: causality vs correlation," by Steve Hsu Professor of physics at the University of Oregon, Information Processing, July 10, 2010 ---
http://infoproc.blogspot.com/2010/07/beyond-bayes-causality-vs-correlation.html

A draft paper by Harvard graduate student James Lee (student of Steve Pinker; I'd love to post the paper here but don't know yet if that's OK) got me interested in the work of statistical learning pioneer Judea Pearl. I found the essay Bayesianism and Causality, or, why I am only a half-Bayesian (excerpted below) a concise, and provocative, introduction to his ideas.

Pearl is correct to say that humans think in terms of causal models, rather than in terms of correlation. Our brains favor simple, linear narratives. The effectiveness of physics is a consequence of the fact that descriptions of natural phenomena are compressible into simple causal models. (Or, perhaps it just looks that way to us ;-)
 

Judea Pearl: I turned Bayesian in 1971, as soon as I began reading Savage’s monograph The Foundations of Statistical Inference [Savage, 1962]. The arguments were unassailable: (i) It is plain silly to ignore what we know, (ii) It is natural and useful to cast what we know in the language of probabilities, and (iii) If our subjective probabilities are erroneous, their impact will get washed out in due time, as the number of observations increases.

Thirty years later, I am still a devout Bayesian in the sense of (i), but I now doubt the wisdom of (ii) and I know that, in general, (iii) is false. Like most Bayesians, I believe that the knowledge we carry in our skulls, be its origin experience, schooling or hearsay, is an invaluable resource in all human activity, and that combining this knowledge with empirical data is the key to scientific enquiry and intelligent behavior. Thus, in this broad sense, I am a still Bayesian. However, in order to be combined with data, our knowledge must first be cast in some formal language, and what I have come to realize in the past ten years is that the language of probability is not suitable for the task; the bulk of human knowledge is organized around causal, not probabilistic relationships, and the grammar of probability calculus is insufficient for capturing those relationships. Specifically, the building blocks of our scientific and everyday knowledge are elementary facts such as “mud does not cause rain” and “symptoms do not cause disease” and those facts, strangely enough, cannot be expressed in the vocabulary of probability calculus. It is for this reason that I consider myself only a half-Bayesian. ...

"You Might Already Know This ... ," by Benedict Carey, The New York Times, January 10, 2011 ---
http://www.nytimes.com/2011/01/11/science/11esp.html?_r=1&src=me&ref=general

In recent weeks, editors at a respected psychology journal have been taking heat from fellow scientists for deciding to accept a research report that claims to show the existence of extrasensory perception.

The report, to be published this year in The Journal of Personality and Social Psychology, is not likely to change many minds. And the scientific critiques of the research methods and data analysis of its author, Daryl J. Bem (and the peer reviewers who urged that his paper be accepted), are not winning over many hearts.

Yet the episode has inflamed one of the longest-running debates in science. For decades, some statisticians have argued that the standard technique used to analyze data in much of social science and medicine overstates many study findings — often by a lot. As a result, these experts say, the literature is littered with positive findings that do not pan out: “effective” therapies that are no better than a placebo; slight biases that do not affect behavior; brain-imaging correlations that are meaningless.

By incorporating statistical techniques that are now widely used in other sciences — genetics, economic modeling, even wildlife monitoring — social scientists can correct for such problems, saving themselves (and, ahem, science reporters) time, effort and embarrassment.

“I was delighted that this ESP paper was accepted in a mainstream science journal, because it brought this whole subject up again,” said James Berger, a statistician at Duke University. “I was on a mini-crusade about this 20 years ago and realized that I could devote my entire life to it and never make a dent in the problem.”

In recent weeks, editors at a respected psychology journal have been taking heat from fellow scientists for deciding to accept a research report that claims to show the existence of extrasensory perception.

The report, to be published this year in The Journal of Personality and Social Psychology, is not likely to change many minds. And the scientific critiques of the research methods and data analysis of its author, Daryl J. Bem (and the peer reviewers who urged that his paper be accepted), are not winning over many hearts.

Yet the episode has inflamed one of the longest-running debates in science. For decades, some statisticians have argued that the standard technique used to analyze data in much of social science and medicine overstates many study findings — often by a lot. As a result, these experts say, the literature is littered with positive findings that do not pan out: “effective” therapies that are no better than a placebo; slight biases that do not affect behavior; brain-imaging correlations that are meaningless.

By incorporating statistical techniques that are now widely used in other sciences — genetics, economic modeling, even wildlife monitoring — social scientists can correct for such problems, saving themselves (and, ahem, science reporters) time, effort and embarrassment.

“I was delighted that this ESP paper was accepted in a mainstream science journal, because it brought this whole subject up again,” said James Berger, a statistician at Duke University. “I was on a mini-crusade about this 20 years ago and realized that I could devote my entire life to it and never make a dent in the problem.”

The statistical approach that has dominated the social sciences for almost a century is called significance testing. The idea is straightforward. A finding from any well-designed study — say, a correlation between a personality trait and the risk of depression — is considered “significant” if its probability of occurring by chance is less than 5 percent.

This arbitrary cutoff makes sense when the effect being studied is a large one — for example, when measuring the so-called Stroop effect. This effect predicts that naming the color of a word is faster and more accurate when the word and color match (“red” in red letters) than when they do not (“red” in blue letters), and is very strong in almost everyone.

“But if the true effect of what you are measuring is small,” said Andrew Gelman, a professor of statistics and political science at Columbia University, “then by necessity anything you discover is going to be an overestimate” of that effect.

Consider the following experiment. Suppose there was reason to believe that a coin was slightly weighted toward heads. In a test, the coin comes up heads 527 times out of 1,000.

Is this significant evidence that the coin is weighted?

Classical analysis says yes. With a fair coin, the chances of getting 527 or more heads in 1,000 flips is less than 1 in 20, or 5 percent, the conventional cutoff. To put it another way: the experiment finds evidence of a weighted coin “with 95 percent confidence.”

Yet many statisticians do not buy it. One in 20 is the probability of getting any number of heads above 526 in 1,000 throws. That is, it is the sum of the probability of flipping 527, the probability of flipping 528, 529 and so on.

But the experiment did not find all of the numbers in that range; it found just one — 527. It is thus more accurate, these experts say, to calculate the probability of getting that one number — 527 — if the coin is weighted, and compare it with the probability of getting the same number if the coin is fair.

Statisticians can show that this ratio cannot be higher than about 4 to 1, according to Paul Speckman, a statistician, who, with Jeff Rouder, a psychologist, provided the example. Both are at the University of Missouri and said that the simple experiment represented a rough demonstration of how classical analysis differs from an alternative approach, which emphasizes the importance of comparing the odds of a study finding to something that is known.

The point here, said Dr. Rouder, is that 4-to-1 odds “just aren’t that convincing; it’s not strong evidence.”

And yet classical significance testing “has been saying for at least 80 years that this is strong evidence,” Dr. Speckman said in an e-mail.

The critics have been crying foul for half that time. In the 1960s, a team of statisticians led by Leonard Savage at the University of Michigan showed that the classical approach could overstate the significance of the finding by a factor of 10 or more. By that time, a growing number of statisticians were developing methods based on the ideas of the 18th-century English mathematician Thomas Bayes.

Bayes devised a way to update the probability for a hypothesis as new evidence comes in.

So in evaluating the strength of a given finding, Bayesian (pronounced BAYZ-ee-un) analysis incorporates known probabilities, if available, from outside the study.

It might be called the “Yeah, right” effect. If a study finds that kumquats reduce the risk of heart disease by 90 percent, that a treatment cures alcohol addiction in a week, that sensitive parents are twice as likely to give birth to a girl as to a boy, the Bayesian response matches that of the native skeptic: Yeah, right. The study findings are weighed against what is observable out in the world.

In at least one area of medicine — diagnostic screening tests — researchers already use known probabilities to evaluate new findings. For instance, a new lie-detection test may be 90 percent accurate, correctly flagging 9 out of 10 liars. But if it is given to a population of 100 people already known to include 10 liars, the test is a lot less impressive.

It correctly identifies 9 of the 10 liars and misses one; but it incorrectly identifies 9 of the other 90 as lying. Dividing the so-called true positives (9) by the total number of people the test flagged (18) gives an accuracy rate of 50 percent. The “false positives” and “false negatives” depend on the known rates in the population.

Continued in article

What went wrong with accountics research ---
http://www.trinity.edu/rjensen/Theory01.htm#WhatWentWrong

Skills and knowledge should be required as part of the pre-certification education of CPAs
Prompted by New York’s forthcoming adoption of the 150-hour requirement to sit for the CPA exam, the NYSSCPA’s Quality Enhancement Policy Committee drafted a white paper to encourage discussion on what skills and knowledge should be required as part of the pre-certification education of CPAs. This white paper, which was approved by the Society’s Board of Directors, is presented here, along with additional commentary from the NYSSCPA’s Higher Education Committee.
Quality Enhancement Policy Committee Sharon Sabba Fierstein, Chair, August 2008 --- http://www.nysscpa.org/cpajournal/2008/808/infocus/p26.htm

Mary-Jo Kranacher Editorial, CPA Journal, August 2008 --- http://www.nysscpa.org/cpajournal/2008/808/essentials/p80.htm

Specific requirements for becoming a CPA, and the rights and obligations of a licensed CPA, are set forth in the laws and regulations of 54 United States jurisdictions --- http://www.cpa-exam.org/global/boards.html

NASBA Tools --- http://www.nasbatools.com/display_page
NASBA Resources (Includes documents and audio files on knowledge requirements) --- http://www.nasba.org/nasbaweb/NASBAWeb.nsf/wpmtp?openform

Free and Fee CPA Review Courses --- http://www.trinity.edu/rjensen/Bookbob1.htm#010303CPAExam

Bob Jensen's threads on accountancy careers --- http://www.trinity.edu/rjensen/Bookbob1.htm#careers

Peter, Paul, and Barney: An Essay on 2008 U.S. Government Bailouts of Private Companies ---
http://www.trinity.edu/rjensen/2008Bailout.htm

Where I Made My Money Consulting and How
If you think I’m a great fan of historical cost, Pat, you’re nuts.

Pat Walters at Fordham University asked how I found the time to make so many Camtasia videos on top of other things I do like send out AECM messages by the thousands.

My first answer is that the time I spent making most of my Camtasia videos actually saved me much more time, especially boring time at having to repeat demos to confused students who lined up outside may office all day long on many days. My second answer is that Camtasia videos, one in particular, led to a lot of consulting opportunities around the world.

First I should note that my teaching style has always been costly in terms of my time. When I taught any course I insisted on my students learning technical details. For example, when I taught Accounting Information Systems (AIS), I did not just teach the theory of relational databases. I insisted that my students learn relational database software, which happened to be MS Access because that’s the only relational database software that Trinity University would provide for my students.

I did not want to take up much class time demonstrating use of software. Instead, each week I passed out a list of Possible Quiz Questions (PQQs) where each PQQ had a recipe for doing a task in MS Access, usually by focusing on the Northwind Database that used to be available from Microsoft. In class each student had a computer in an electronic classroom. I randomly picked a few PQQs with changed inputs and gave a quiz in every class throughout the semester --- even if we were no longer even discussing database theory in class.

Invariably students or usually pairs of students could not get my PQQ recipes to fully work. I found myself spending a typical day repeatedly demonstrating the same thing over and over again to different pairs of students. So I commenced to make Camtasia videos that cut down over 95% of the student traffic regarding PQQ issues. You can sample one or more of my PQQ videos at http://www.cs.trinity.edu/~rjensen/video/acct5342/

When I taught AIS I made my students learn how to use the Excel pivot tables provided with each of the Microsoft annual financial statements. These are a bit tricky to use, so I made the helper videos linked at
http://www.cs.trinity.edu/~rjensen/video/acct5342/MicrosoftPivots/ 

When I taught Accounting Theory, I made my students do XBRL financial statement analysis of a number of companies that the Korean KOSDAQ stock exchange marked up with XBRL tags. KOSDAQ provided reader software to analyze those tags. My students had great difficulty on these assignments --- so I made the XBRLdemos2005.wmv video file listed at http://www.cs.trinity.edu/~rjensen/video/windowsmedia/

Now let’s talk about the most important video that I ever made ---
a video that helped me pay for my house up here in the mountains.

When I taught Accounting Theory, about a third of the course was spent on technical details in FAS 133 and IAS 39 and much of this time was spent on teaching the first 10 examples in Appendix B of FAS 133 for which my main teaching guides are the 133ex Excel Workbooks listed at http://www.cs.trinity.edu/~rjensen/
These files still are being downloaded by thousands of strangers around the world.

But FAS 133 sometimes was not sufficiently detailed to suit me. For example, in Example 5 of FAS 133 the FASB simply provides the interest rate swap values out of thin air. I made my students learn how to value interest rate swaps. For this purpose I created the wonder video 133ex05a.wmv video file listed at
http://www.cs.trinity.edu/~rjensen/video/acct5341/

Supporting documentation can be found in the following two files listed at

133ex05a.xls (the Effective spreadsheet within this Excel workbook)
133ex05.htm file of a paper that Carl Hubbard and I published about swap valuation
Also see http://www.trinity.edu/rjensen/acct5341/speakers/133swapvalue.htm
Much of what I learned about swap valuation I learned from Carl.

Largely due to the 133ex05.htm paper that Carl and I published, I have received over 1,000 inquiries by telephone or email from investment bankers, Big Four auditors, and accounting professors around the world asking me about swap valuation. Rather than repeat myself over and over, I request that each of them watch my 133ex05a.wmv video from beginning to end. That’s sometimes all they wanted to know, although on many occasions I get more complicated questions afterwards, some of which I cannot answer and some of which I can answer.

That one 133ex05a.wmv video plus my other free derivatives accounting files have led to many consulting trips in the U.S., Canada, Mexico, China, and Europe. It also led to invited lectures in those places plus New Zealand. The lecture visits are listed at http://www.trinity.edu/rjensen/resume.htm#Presentations
Consulting fees ranged from $8,000 per day at GE Capital to $0 for folks that really needed help in developing nations. A colleague professor of finance, Phil Cooley, always said I sold myself too cheap.  I think I usually was overpaid.

If you think I’m a great fan of historical cost, Pat, you’re nuts.
In retirement with my wife in ill health, I’ve cut back greatly on travel and even turned down an offer of two lucrative years in a think tank in Australia. But a few companies have since beat a path to my door up here in the White Mountains where I spend usually a day with them consulting on FAS 133 and in particular derivative financial instruments valuation. If you think I’m a great fan of historical cost, Pat, you’re nuts.

Now, Pat, when you ask me where I found the time to make all those Camtasia videos, my answer is that I made the time on a lot of Saturdays and Sundays in my office at Trinity University. And these videos saved me tenfold that amount of time with students. And they helped me buy a rather expensive home up here in the White Mountains.

My free FAS 133 and IAS 39 tutorials (some with audio and video files) are listed at http://www.trinity.edu/rjensen/caseans/000index.htm

My philosophy is that it’s better to give than receive, and I found that in the process I received more than I gave. I would not have learned nearly as much about FAS 133 and IAS 39 had I not given most of what I know away for free!

And the funny thing about consulting is that I often do not know the technical answers raised by finance experts who literally beat a path to my door. But I find that if we interactively begin to work through their problems they usually ending up paying me for answers they reason out by themselves from my ad hoc version of the Socratic process.
Dah

Bob Jensen's free FAS 133 and IAS tutorials (some with audio and video files) can be found at
http://www.trinity.edu/rjensen/caseans/000index.htm

March 24, 2010 message to the AECM

I think professors who do not open share extensively on the Web miss the boat.
Selfishness has its own punishments, and generosity has its own rewards.
Scroll most of the way down in this message for an example from XXXXX

Will Yancey was a pioneer in open sharing on the Web ---
http://www.trinity.edu/rjensen/Yancey.htm
Will made a very good living consulting and found that open sharing pays back enormously, much better in his case than any kind of paid advertising. But if you would’ve known Will you would’ve also discovered that he shared openly out of the kindness of his big heart. I doubt that he even thought about payback when he commenced to open share so generously.

I was also an early-on open sharing professor and never once did so with the thought of payback in mind. However, I am forwarding the message below to show that once of the benefits of open sharing is payback ---
http://www.trinity.edu/rjensen/threads.htm

Once again, however, I stress that I would open share if there was not a penny of monetary payback. I open share because it makes me feel good to make a difference in the academy of professors and students.

When you do open share technical content, potential clients find your work using Google, Bing, and other Web crawlers.
I think professors who do not open share extensively miss the boat.
Selfishness has its own punishments, and generosity has its own rewards.

My threads on this type of problem are at
http://www.trinity.edu/rjensen/acct5341/speakers/133swapvalue.htm

My excel workbook contains an “Effective” spreadsheet at in the 133ex05a.xls file at
http://www.cs.trinity.edu/~rjensen/

I also provide a 133ex05a.wmv video at
http://www.cs.trinity.edu/~rjensen/video/acct5341/

Professors Who Blog ---
http://www.trinity.edu/rjensen/accountingnews.htm

My Outstanding Educator Award Speech ---
http://www.trinity.edu/rjensen/000aaa/AAAaward_files/AAAaward02.htm

From: XXXXX
Sent: Wednesday, March 24, 2010 4:26 PM
To: Jensen, Robert
Subject: Interest Rate Swap Valuation?

Hi Bob,

I found you on the internet. We are doing a Dec 31 2009 audit and our client obtained a mortgage loan in 2009, and entered into a fixed rate mortgage rate swap on the loans interest. I would like to get a fair value quote for the swap at Dec. 31,2009. Would you be available to consult with us on this valuation? Please advise interest and your fee?

 Many thanks,

harry

XXXXX

 

Accounting History in a Nutshell

Humanity is forgetting its history more rapidly. And celebrities are losing their fame faster than ever.
Marc Parry, "Scholars Elicit a 'Cultural Genome' From 5.2 Million Google-Digitized Books," Chronicle of Higher Education, December 16, 2010 ---
http://chronicle.com/article/Scholars-Elicit-a-Cultural/125731/?sid=wc&utm_source=wc&utm_medium=en

Jensen Comment
It's ironic that the irrelevance of history in our academic disciplines is transpiring at at time when historical works are increasingly available and searchable at virtually zero cost. Perhaps one problem is that we're increasingly discovering how vast the histories of our discipline have become. Do intermediate accounting instructors even mention the works of O'Neal, Canning, Paton, and Littleton in this century?

 

Confucius is described, by Sima Qian and other sources, as having endured a poverty-stricken and humiliating youth and been forced, upon reaching manhood, to undertake such petty jobs as accounting and caring for livestock.

History of Quantitative Finance
"Four features in appreciation of the life and work of Benoit Mandelbrot," Simoleon Sense, February 3, 2011 ---
http://www.simoleonsense.com/four-features-in-appreciation-of-the-life-and-work-of-benoit-mandelbrot/

Some Accounting History Sites

Accounting History Libraries at the University of Mississippi (Ole Miss) --- http://www.olemiss.edu/depts/accountancy/libraries.html
The above libraries include international accounting history.
The above libraries include film and video historical collections.

MAAW Knowledge Portal for Management and Accounting --- http://maaw.info/

Academy of Accounting Historians and the Accounting Historians Journal ---
http://www.accounting.rutgers.edu/raw/aah/

Sage Accounting History --- http://ach.sagepub.com/cgi/pdf_extract/11/3/269

A nice timeline on the development of U.S. standards and the evolution of thinking about the income statement versus the balance sheet is provided at:
"The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards (1930-1973)," by Stephen A. Zeff, CPA Journal, January 2005 --- http://www.nysscpa.org/cpajournal/2005/105/infocus/p18.htm
Part II covering years 1974-2003 published in February 2005 --- http://www.nysscpa.org/cpajournal/2005/205/index.htm 

A nice timeline of accounting history --- http://www.docstoc.com/docs/2187711/A-HISTORY-OF-ACCOUNTING

From Texas A&M University
Accounting History Outline --- http://acct.tamu.edu/giroux/history.html

Canadian Printer and Publisher (history of various trades and industries) ---  http://link.library.utoronto.ca/cpp/
You can search for various industry terms such as accounting, cost, bookkeeping, etc.

Bob Jensen's timeline of derivative financial instruments and hedge accounting ---
http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

History of Fraud in America --- http://www.trinity.edu/rjensen/415wp/AmericanHistoryOfFraud.htm
Also see http://www.trinity.edu/rjensen/Fraud.htm

---

"A Brief History of the Corporation: 1600 to 2100," by Venkat, RibbonFarm, June 8, 2011 ---
http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-corporation-1600-to-2100/

June 23, 2011 reply from Rick Lilly

Hi Bob,

I am reading an interesting book titled Life Inc., How Corporatism Conquered the World, and How We Can Take It Back, by Douglas Ruskhoff (ISBN-13: 978-0812978506).  Below is the URL link to the Amazon.com web page.

Link:  http://www.amazon.com/Life-Inc-Corporatism-Conquered-World/dp/0812978501/ref=sr_1_3?s=books&ie=UTF8&qid=1308848737&sr=1-3

Rick Lillie, MAS, Ed.D., CPA
Assistant Professor of Accounting
Coordinator, Master of Science in Accountancy
CSUSB, CBPA, Department of Accounting & Finance
5500 University Parkway, JB-547
San Bernardino, CA.  92407-2397

 

June 23, 2011 reply from Bob Jensen

A History of Entrereneurship
"Who Are The Entrepreneurs: The Elite or the Everyday Man? A History of Entrepreneurship," by Heather A. Haveman, Jacob Habinek, and Leo A Googman, UC Berkeley,  2011 ---
http://www.escholarship.org/uc/item/392635v2;jsessionid=00ECE18AD2472F4956AAF2D00CC2132E#page-2
 Who Are The Entrepreneurs: The Elite or the Everyday Man? A History of Entrepreneurship

June 23, 2011 reply from Jagdish Gangolly

Bob,

The years 1770-72 were also infamous for another reason. The East India Company which had earlier used the grant given to it by the Mughal emperor Akbar to the city of Calcutta had established its control over Bengal. Its disastrous tax and other policies, compounded by drought, led to the death by starvation of 10 million people.

Warren Hastings, who was the Governor General, was later impeached (for corruption) and later acquitted by the British Parliament. He was later made a Privy Councillor, a rather strange honour for one who stood like a Greek hero, counting the British tax revenues (which multiplied), while 10 million human beings died of starvation.

Venkat's lament about Alexander Fordyce's absconding for half a million pounds debt is a petty matter relative to the death of 10 million people caused by Hastings and his cohorts at the same British East India Company.

Sen asks a profound rhetorical question why there have been no famines in India since the British left. Democracy does not permit it.

Edmund Burke's speech in the British Parliament in the impeachment proceedings is, in my opinion, one of the finest pieces of writing in the English language. Here is a snippet:

_________________________________________________

My Lords, the East India Company have not arbitrary power to give him; the King has no arbitrary power to give him; your Lordships have not; nor the Commons, nor the whole Legislature. We have no arbitrary power to give, because arbitrary power is a thing which neither any man can hold nor any man can give. No man can lawfully govern himself according to his own will; much less can one person be governed by the will of another. We are all born in subjection -- all born equally, high and low, governors and governed, in subjection to one great, immutable, pre-existent law, prior to all our devices and prior to all our contrivances, paramount to all our ideas and all our sensations, antecedent to our very existence, by which we are knit and connected in the eternal frame of the universe, out of which we cannot stir.

This great law does not arise from our conventions or compacts; on the contrary, it gives to our conventions and compacts all the force and sanction they can have. It does not arise from our vain institutions. Every good gift is of God; all power is of God; and He who has given the power, and from Whom alone it originates, will never suffer the exercise of it to be practised upon any less solid foundation than the power itself. If, then, all dominion of man over man is the effect of the Divine disposition, it is bound by the eternal laws of Him that give it, with which no human authority can dispense neither he that exercises it, nor even those who are subject to it; and if they were mad enough to make an express compact that should release their magistrate from his duty, and should declare their lives, liberties, and properties dependent upon, not rules and laws, but his mere capricious will, that covenant would be void. The acceptor of it has not his authority increased, but he has his crime doubled. Therefore can it be imagined, if this be true, that He will suffer this great gift of government, the great, the best, that was ever given by God to mankind, to be the plaything and the sport of the feeble will of a man, who, by a blasphemous, absurd, and petulant usurpation, would place his own feeble, comtemptible, ridiculous will in the place of the Divine wisdom and justice?

The title of conquest makes no difference at all. No conquest can give such a right; for conquest, that is force, cannot convert its own injustice into a just title by which it may rule others at its pleasure. By conquest, which is a more immediate designation of the hand of God, the conqueror succeeds to all the painful duties and subordination to the power of God which belonged to the sovereign whom he has displaced, just as if he had come in by the positive law of some descent or some election. To this at least he is strictly bound: he ought to govern them as he governs his own subjects. But every wise conqueror has gone much further than he was bound to go. It has been his ambition and his policy to reconcile the vanquished to his fortune, to show that they had gained by the change, to convert their momentary suffering into a long benefit, and to draw from the humiliation of his enemies an accession to his own glory. This has been so constant a practice, that it is to repeat the histories of all politic conquerors in all nations and in all times; and I will not so much distrust your Lordships' enlightened and discriminating studies and correct memories as to allude to any one of them. I will only show you that the Court of Directors, under whom he served, has adopted that idea that they constantly inculcated it to him, and to all the servants that they run a parallel between their own and the native government, and, supposing it to be very evil, did not hold it up as an example to be followed, but as an abuse to be corrected that they never made it a question, whether India is to be improved by English law and liberty, or English law and liberty vitiated by Indian corruption. ... ...

Source: http://www.ourcivilisation.com/smartboard/shop/burkee/extracts/chap12.htm  ________________________________________________________________________

How profound and timely, in the context of all recent corruption scandals.

Jagdish -- Jagdish S. Gangolly, (j.gangolly@albany.edu) Vincent O'Leary Professor Emeritus of Informatics, Director, PhD Program in Information Science, Department of Informatics, College of Computing & Information 7A Harriman Campus Road, Suite 220 State University of New York at Albany, Albany, NY 12206. Phone: (518) 956-8251, Fax: (518) 956-8247 URL: http://www.albany.edu/acc/gangolly

 

History of Fraud in America --- 
http://www.trinity.edu/rjensen/415wp/AmericanHistoryOfFraud.htm

"Harvard Grad Starts Math Museum Helped by Google, Hedge Funder," by Patrick Cole, Bloomberg Business Week, November 1, 2011 ---
http://www.businessweek.com/news/2011-11-01/harvard-grad-starts-math-museum-helped-by-google-hedge-funder.html

Bob Jensen's links to mathematics history, tutorials, videos, and free online education and research materials ---
http://www.trinity.edu/rjensen/Bookbob2.htm#050421Mathematics

Bob Jensen's links to history, tutorials, videos, and free online education and research materials in other disciplines---
http://www.trinity.edu/rjensen/Bookbob2.htm

Also see
http://www.trinity.edu/rjensen/000aaa/updateee.htm#OKI 

 

---

September 29, 2011 message from Barbara Scofield

One of the 2011 MacArthur Fellows is a historian, one of whose specialties is the history of accounting:

 

http://www.macfound.org/site/c.lkLXJ8MQKrH/b.7731011/k.1A2A/Jacob_Soll.htm

 

For an NPR interview see http://whyy.org/cms/radiotimes/2011/09/28/a-conversation-with-2011-macarthur-fellow-jacob-soll/

 

Barbara W. Scofield, PhD, CPA
Chair of Graduate Business Studies
Professor of Accounting
The University of Texas of the Permian Basin
4901 E. University Dr.
Odessa, TX   79762

Jacob Soll, European Historian --- http://www.macfound.org/site/c.lkLXJ8MQKrH/b.7731011/k.1A2A/Jacob_Soll.htm

Jacob Soll is a historian whose meticulously researched studies of early modern Europe are shedding new light on the origins of the modern state. Drawing on intellectual, political, cultural, and institutional history, Soll explores the development of political thought and criticism in relation to governance from the sixteenth to the eighteenth centuries in Western Europe. Soll's first book, Publishing "The Prince" (2005), examines the role of commentaries, editions, and translations of Machiavelli produced by the previously little-studied figure Amelot de La Houssaye (1634-1706), who became the most influential writer on secular politics during the reign of Louis XIV. Grounded in extensive analysis of archival, manuscript, and early printed sources, Soll shows how Amelot and his publishers arranged prefaces, columns, and footnotes in a manner that transformed established works, imbuing books previously considered as supporting royal power with an alternate, even revolutionary, political message. In The Information Master (2009), he investigates the formation of a state-information gathering and classifying network by Louis XIV's chief minister, Jean-Baptiste Colbert (1619-1683), revealing that Colbert's passion for information was both a means of control and a medium for his own political advancement: his systematic and encyclopedic information collection served to strengthen and uphold Louis XIV's absolute rule. With these and other projects in progress — including an intellectual and practical history of accounting and its role in governance in the modern world and a study of the composition of library catalogues during the Enlightenment — Soll is opening up new fields of inquiry and elucidating how modern governments came into being.

Jacob Soll received a B.A. (1991) from the University of Iowa, a D.E.A. (1993) from the École des Hautes Études en Sciences Sociales, and a Ph.D. (1998) from Magdalene College, Cambridge University. He has been affiliated with Rutgers University, Camden, since 1999, where he is currently a professor in the Department of History.

Also see
The information master: Jean-Baptiste Colbert's secret state intelligence system - By Jacob Soll ---
http://ideas.repec.org/a/bla/ehsrev/v63y2010i1p261-262.html
Or go directly to
The Economic History Review
Volume 63, Issue 1, pages 261–262, February 2010
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0289.2009.00511_20.x/full

From Encylopedia Britannica --- http://www.britannica.com/EBchecked/topic/124928/Jean-Baptiste-Colbert
(which in part provides early history of clawback return of gains to government, something the SEC is avoiding in the early 21st Century fraud convictions)
Also note the stress on manufacturing regulation and quality controls.

Colbert was born of a merchant family. After holding various administrative posts, his great opportunity came in 1651, when Cardinal Mazarin, the dominant political figure in France, was forced to leave Paris and take refuge in a provincial city—an episode in the Fronde, a period (1648–53) of struggle between the crown and the French parlement. Colbert became Mazarin’s agent in Paris, keeping him abreast of the news and looking after his personal affairs. When Mazarin returned to power, he made Colbert his personal assistant and helped him purchase profitable appointments for both himself and his family. Colbert became wealthy; he also acquired the barony of Seignelay. On his deathbed, Mazarin recommended him to Louis XIV, who soon gave Colbert his confidence. Thenceforth Colbert dedicated his enormous capacity for work to serving the King both in his private affairs and in the general administration of the kingdom.

The struggle with Fouquet.

For 25 years Colbert was to be concerned with the economic reconstruction of France. The first necessity was to bring order into the chaotic methods of financial administration that were then under the direction of Nicolas Fouquet, the immensely powerful surintendant des finances. Colbert destroyed Fouquet’s reputation with the King, revealing irregularities in his accounts and denouncing the financial operations by which Fouquet had enriched himself. The latter’s fate was sealed when he made the mistake of receiving the King at his magnificent chateau at Vaux-le-Vicomte; the Lucullan festivities, displaying how much wealth Fouquet had amassed at the expense of the state, infuriated Louis. The King subsequently had him arrested. The criminal proceedings against him lasted three years and excited great public interest. Colbert, without any rightful standing in the case, interfered in the trial and made it his personal affair because he wanted to succeed Fouquet as finance minister. The trial itself was a parody of justice. Fouquet was sent to prison, where he spent the remaining 15 years of his life. The surintendance was replaced by a council of finance, of which Colbert became the dominant member with the title of intendant until, in 1665, he became controller general.

Financiers and tax farmers had made enormous profits from loansand advances to the state treasury, and Colbert established tribunals to make them give back (clawbacks) some of their gains. This was well received by public opinion, which held the financiers responsible for all difficulties; it also lightened the public debt, which was further reduced by the repudiation of some government bonds and the repayment of others without interest. Private fortunes suffered, but no disturbances ensued, and the King’s credit was restored.

Financial and economic affairs.

Colbert’s next efforts were directed to reforming the chaotic system of taxation, a heritage of medieval times. The King derived the major part of his revenue from a tax called the taille, levied in some districts on individuals and in other districts on land and businesses. In some districts the taille was apportioned and collected by royal officials; in others it was voted by the representatives of the province. Many persons, including clergy and nobles, were exempt from it altogether. Colbert undertook to levy the taille on all who were properly liable for it and so initiated a review of titles of nobility in order to expose those who were claiming exemption falsely; he also tried to make the tax less oppressive by a fairer distribution. He reduced the total amount of it but insisted on payment in full over a reasonable period of time. He took care to suppress many abuses of collection (confiscation of defaulters’ property, seizure of peasants’ livestock or bedding, imprisonment of collectors who had not been able to produce the due sums in time). These reforms and the close supervision of the officials concerned brought large sums into the treasury. Other taxes were increased, and the tariff system was revised in 1664 as part of a system of protection. The special dues that existed in the various provinces could not be swept away, but a measure of uniformity was obtained in central France.

Colbert devoted endless energy to the reorganization of industry and commerce. He believed that in order to increase French power it would be essential to increase France’s share of international trade and in particular to reduce the commercial hegemony of the Dutch. This necessitated not only the production of high-quality goods that could compete with foreign products abroad but also the building up of a merchant fleet to carry them. Colbert encouraged foreign workers to bring their trade skills to France. He gave privileges to a number of private industries and foundedstate manufactures. To guarantee the standard of workmanship, he made regulations for every sort of manufacture and imposed severe punishments (fines and the pillory) for counterfeiting and shortcomings. He encouraged the formation of companies to build ships and tried to obtain monopolies for French commerce abroad through the formation of trading companies. The French East India and West India companies, founded in 1664, were followed by others for trade with the eastern Mediterranean and with northern Europe; but Colbert’s propaganda for them, though cleverly conducted, failed to attract sufficient capital, and their existence was precarious. The protection of national industry demanded tariffs against foreign produce, and other countries replied with tariffs against French goods. This tariff warfare was one of the chief causes of the Dutch War of 1672–78.

Colbert’s system of control was resented by traders and contractors, who wanted to preserve their freedom of action and to be responsible to themselves alone. Cautious and thrifty people, moreover, still preferred the old outlets for their money (land, annuities, moneylending) to investing in industry. The period, too, was one of generally falling prices throughout the world. Colbert’s success, therefore, fell short of his expectation, but what he did achieve seems all the greater in view of the obstacles in his way: he raised the output of manufactures, expanded trade, set up new permanent industries, and developed communications by road and water across France (Canal du Midi, 1666–81).

Continued in article

---

"Mapping Novels with Google Earth," Chronicle of Higher Education, April 6, 2011 ---
http://chronicle.com/blogs/profhacker/mapping-novels/32528?sid=wc&utm_source=wc&utm_medium=en

Jensen Comment
Various accounting student team projects come to mind using the above technology. One could be an accounting history project in which students map important events in early accounting history, some of which are mentioned at
http://www.trinity.edu/rjensen/Theory01.htm#AccountingHistory

Abacus Techniques by Totton Heffelfinger & Gary Flom.

Articles, Excerpts and Analysis

The Abacus vs.The Electric Calculator

In 1946, a contest held in Tokyo, pitted an abacus against an electric calculator; the abacus won, of course.
 

Feynman vs. The Abacus

Richard Feynman battles against the abacus; the result is not surprising (if you know Feynman).
 

Comparing the Chinese and the Mesoamerican Abacus

An analysis contributed by David B. Kelley.

 

The Roman Hand-Abacus

An analysis contributed by Steve Stephenson.

 

The Incan Khipu

String, and Knot, Theory of Inca Writing by John Noble Wilford.
Talking Knots of the Incas by Viviano and Davide Domenici.

 

Lost Tribes, Lost Knowledge

An article about the dangers of forgetting knowledge learned from the past, by Eugene Linden.

All Things Abacus

Additional Abacus Resources

Purchase  or build an abacus  ·  An abacus for your Palm  ·  Books about the abacus  ·  Java applet source code  ·  The Mesoamerican abacus
 

Resources For Teachers

The abacus in the classroom  ·  Abacus lesson plan  ·  Math and science resources for teachers
 

Photos

High-resolution photos of my abacus collection.

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Early History of Mathematics and Calculating in China
The best general source for ancient Chinese mathematics is Joseph Needham's Science and Civilisation in China, vol. 3. In this volume you will learn, for example, that the Chinese proved the Pythagorean Theorem at the very latest by the Later Han dynasty (25-221 CE). The proof comes from an ancient text called The Arithmetical Classic of the Gnomon and the Circular Paths of Heaven. The book has been translated by Christopher Cullen in his Astronomy and Mathematics in Ancient China: The Zhou Bi Suan Jing. Needham also discusses the abacus, or suanpan ("calculating plate").
Steve Field, Professor of Chinese, Trinity University, September 24, 2008
Jensen Comment
Later Han Dynasty --- http://en.wikipedia.org/wiki/Later_Han_Dynasty_(Five_Dynasties)
Pythagorean Theorem Theorem --- http://en.wikipedia.org/wiki/Pythagorean_Theorem
Pythagorean Theorem (Gougu Theorem in China) History --- http://en.wikipedia.org/wiki/Pythagorean_Theorem#History
Suanpan --- http://en.wikipedia.org/wiki/Suanpan

---

A nice timeline of accounting history --- http://www.docstoc.com/docs/2187711/A-HISTORY-OF-ACCOUNTING

From Texas A&M University
Accounting History Outline --- http://acct.tamu.edu/giroux/history.html

---

A History of Entrereneurship
"Who Are The Entrepreneurs: The Elite or the Everyday Man? A History of Entrepreneurship," by Heather A. Haveman, Jacob Habinek, and Leo A Googman, UC Berkeley,  2011 ---
http://www.escholarship.org/uc/item/392635v2;jsessionid=00ECE18AD2472F4956AAF2D00CC2132E#page-2
 Who Are The Entrepreneurs: The Elite or the Everyday Man? A History of Entrepreneurship

We trace the social positions of the men and women who found new enterprises from the earliest years of one industry’s history to a time when the industry was well established. Sociological theory suggests two opposing hypotheses. First, pioneering entrepreneurs are socially prominent individuals from fields adjacent to the new industry and later entrepreneurs are from an increasingly broad swath of society. Second, the earliest entrepreneurs come from the social periphery while later entrepreneurs include more industry insiders and members of the social elite. To test these hypotheses, we study the magazine industry in America over the first 120 years of its history, from 1741 to 1860. We find that magazine publishing was originally restricted to industry insiders, elite professionals, and the highly educated, but by the time the industry became well established, most founders came from outside publishing and more were of middling stature – mostly small-town doctors and clergy without college degrees. We also find that magazines founded by industry insiders remained concentrated in the three biggest cities, while magazines founded by outsiders became geographically dispersed. Finally, we find that entrepreneurship evolved from the pursuit of a lone individual to a more organizationally-sponsored activity; this reflects the modernization of America during this time period. Our analysis demonstrates the importance of grounding studies of entrepreneurship in historical context. Our analysis of this “old” new media industry also offers hints about how the “new” new media industries are likely to evolve.

Bob Jensen's helpers for small business ---
http://www.trinity.edu/rjensen/BookBob1.htm#SmallBusiness

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Video
"Debt: The First 5,000 Years," by Paul Kedrosky , Kedrosky.com, September 10, 2011 --- Click Here
http://paul.kedrosky.com/archives/2011/09/debt-the-first-5000-years.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+InfectiousGreed+%28Paul+Kedrosky%27s+Infectious+Greed%29

Jensen Questions
How did the accounting system account for debt 5,000 years ago?
Does care and nurturing human children create debt to parents?

"When Debt Gets in the Way of Growth," Harvard Business Review Blog, September 13, 2011 --- Click Here
http://blogs.hbr.org/hbr/hbreditors/2011/09/when_debt_gets_in_the_way_of_g.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date

 

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Accounting History (across hundreds of years)
 A Change Fifty-Years in the Making, by Jennie Mitchell, Project Accounting WED Interconnect --- http://accounting.smwc.edu/historyacc.htm

---

Papyrus --- http://en.wikipedia.org/wiki/Papyrus
Early accounting records were written on papyrus

Serious Accounting Historians May Find Some Things of Use Here
Advanced Papyrological Information System from Columbia University --- http://www.columbia.edu/cu/lweb/projects/digital/apis/

Questions
What was an ancient Greek ploy to combat inflation?
How do you account for interest paid in cabbages during hyperinflation?

"The time has come," the Walrus said,
"To talk of many things:
Of shoes--and ships--and sealing-wax--
Of cabbages--and kings--
And why the sea is boiling hot--
And whether pigs have wings."
Lewis Carroll, The Walrus and the Carpenter --- http://www.jabberwocky.com/carroll/walrus.html

"Papyrus Research Provides Insights Into 'Modern Concerns' of Ancient World," Science Daily, October 30, 2010 --- Click Here
http://www.sciencedaily.com/releases/2010/10/101029092045.htm?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+sciencedaily+%28ScienceDaily%3A+Latest+Science+News%29

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Origins of Double Entry Accounting are Unknown

• 1300s A.D. crusades opened the Middle East and Mediterranean trade routes
• Venice and Genoa became venture trading centers for commerce
• 1296 A.D. Fini Ledgers in Florence
• 1340 A.D. City of Massri Treasurers Accounts are in Double Entry form.
• 1458 A.D.Benedikt Kotruljevic (Croatian) (Dubrovnik,1416-L’Aquila,1469) (His Italian name was Benedetto Cotrugli Raguseo), wrote The Book on the Art of Trading which is now acknowledged to be the first person to write a book describing double-entry techniques (although the origins of double entry bookkeeping in practice are unknown)
• 1494 Luca Pacioli's Summa de Arithmetica Geometria Proportionalita (A Review of Arithmetic, Geometry and Proportions) which is the best known early book on double entry bookkeeping in algebraic form. 

Recall that double entry bookkeeping supposedly evolved in Italy long before it was put into algebraic form in the book Summa by Luca Pacioli  and into an earlier book by Benedikt Kotruljevic.

"A Brief History of Double Entry Book-keeping (10 Episodes) ," BBC Radio ---
http://www.bbc.co.uk/programmes/b00r401p
Thanks to Len Steenkamp for the heads up

Jolyon Jenkins investigates how accountants shaped the modern world. They sit in boardrooms, audit schools, make government policy and pull the plug on failing companies. And most of us have our performance measured. The history of accounting and book-keeping is largely the history of civilisation.

Jolyon asks how this came about and traces the religious roots of some accounting practices.

Eventually, educators might be able to get copies of these audio files.

 

October 3, 2009 message from Rick Dull

Benedikt Kotruljevic (Croatian) (Dubrovnik,1416-L’Aquila,1469) (His Italian name was Benedetto Cotrugli Raguseo), who in 1458, wrote "The Book on the Art of Trading" which is now acknowledged to be the first person to write a book describing double-entry techniques? See the American Mathematical Society’s web-site: http://www.ams.org/featurecolumn/archive/book1.html .

Rick Dull

---

And so on --- I think you get the idea.

One truly valuable research for an accounting history mapping project is the free Accounting Historians Journal archive (although not all of the publications are free online but should be free to students using the hard copy stacks in campus libraries) ---
http://www.olemiss.edu/depts/general_library/dac/files/ahj.html

Bob Jensen's threads on accounting history ---
http://www.trinity.edu/rjensen/Theory01.htm#AccountingHistory 

 

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Using MAAW and Jstor for Accounting History Research
A summary of what historical research can be like on the Web
How I found a very, very interesting "Statement by William A. Paton" when he was 91 year old.

This morning on October 18, 2009 I had occasion to search for some Bill Paton's replacement cost history, so I went to MAAW at http://maaw.info/
I then entered the word Paton in the Google search box and this led me to some interesting categories, including the Replacement Cost Accounting Bibliography --- http://www.maaw.info/ReplacementCostArticles.htm
That only yielded two of Paton's articles on replacement cost, but it did provide a ton of other references including many that cite Bill Paton.

In particular I wandered to a well-known and long forgotten article by Steve Zeff:
"Replacement Cost:  Member of the Family, Welcome Guest, or Intruder," by Stephen A. Zeff, The Accounting Review, October 1962. Steve was an Assistant Professor of Accounting at Tulane at the time he wrote this paper.

• Replacement Cost: Member of the Family, Welcome Guest, or Intruder?
• Stephen A. Zeff
• The Accounting Review, Vol. 37, No. 4 (Oct., 1962), pp. 611-625
  (article consists of 15 pages)
• Published by: American Accounting Association
• Stable URL: http://www.jstor.org/stable/242348

My Emeritus status at Trinity University allows me free access to Trinity's fabulous subscriptions to electronic library databases, including Jstor. I next proceeded online to Jstor and found the following articles by Steve Zeff

 

• 1.
  • Some Junctures in the Evolution of the Process of Establishing Accounting Principles in the U.S.A.: 1917-1972 Some Junctures in the Evolution of the Process of Establishing Accounting Principles in the U.S.A.: 1917-1972
  • Stephen A. Zeff
  • The Accounting Review, Vol. 59, No. 3 (Jul., 1984), pp. 447-468
  • Item Information Page of First Match PDF Export this Citation
• 2.
  • Truth in Accounting: The Ordeal of Kenneth MacNeal Truth in Accounting: The Ordeal of Kenneth MacNeal
  • Stephen A. Zeff
  • The Accounting Review, Vol. 57, No. 3 (Jul., 1982), pp. 528-553
  • Item Information Page of First Match PDF Export this Citation
• 3.
  • Accounting Journals in Business School Libraries Accounting Journals in Business School Libraries
  • Stephen A. Zeff
  • The Accounting Review, Vol. 43, No. 1 (Jan., 1968), pp. 150-153
  • Item Information Page of First Match PDF Export this Citation
• 4.
  • Chronology of Significant Developments in the Establishment of Accounting Principles in the United States, 1926-1972 Chronology of Significant Developments in the Establishment of Accounting Principles in the United States, 1926-1972
  • Stephen A. Zeff
  • Journal of Accounting Research, Vol. 10, No. 1 (Spring, 1972), pp. 217-227
  • Item Information Page of First Match PDF Export this Citation
• 5.
  • "Price-Level" Should Be Taught... in the Introductory Course "Price-Level" Should Be Taught... in the Introductory Course
  • Stephen A. Zeff
  • The Accounting Review, Vol. 36, No. 4 (Oct., 1961), pp. 642-645
  • Item Information Page of First Match PDF Export this Citation
• 6.
  • Right of Offset vs. Partnership Act in Winding-Up Process Right of Offset vs. Partnership Act in Winding-Up Process
  • Stephen A. Zeff
  • The Accounting Review, Vol. 32, No. 1 (Jan., 1957), pp. 68-70
  • Item Information Page of First Match PDF Export this Citation
• 7.
  • Debating Accounting Theory Debating Accounting Theory
  • Stephen A. Zeff
  • The Accounting Review, Vol. 38, No. 3 (Jul., 1963), pp. 622-626
  • Item Information Page of First Match PDF Export this Citation
• 8.
  • Replacement Cost: Member of the Family, Welcome Guest, or Intruder? Replacement Cost: Member of the Family, Welcome Guest, or Intruder?
  • Stephen A. Zeff
  • The Accounting Review, Vol. 37, No. 4 (Oct., 1962), pp. 611-625
  • Item Information Page of First Match PDF Export this Citation
• 9.
  • The Curious Accounting Treatment of the Swedish Government Loan to Uddeholm The Curious Accounting Treatment of the Swedish Government Loan to Uddeholm
  • Stephen A. Zeff, Sven-Erik Johansson
  • The Accounting Review, Vol. 59, No. 2 (Apr., 1984), pp. 342-350
  • Item Information Page of First Match PDF Export this Citation
• 10.
  • Holding Gains on Fixed Assets -- A Demurrer Holding Gains on Fixed Assets -- A Demurrer
  • Stephen A. Zeff, W. David Maxwell
  • The Accounting Review, Vol. 40, No. 1 (Jan., 1965), pp. 65-75
  • Item Information Page of First Match PDF Export this Citation
• 11.
  • A Note on the Measure of Compensation Implicit in Employee Stock Options A Note on the Measure of Compensation Implicit in Employee Stock Options
  • Kenneth J. Boudreaux, Stephen A. Zeff
  • Journal of Accounting Research, Vol. 14, No. 1 (Spring, 1976), pp. 158-162
  • Item Information Page of First Match PDF Export this Citation
• 12.
  • Review: [untitled] Review: [untitled]
  • Reviewed work(s): Selected Dickinson Lectures in Accounting: 1936-1952 by Stephen A. Zeff
  • The Accounting Review, Vol. 55, No. 4 (Oct., 1980), p. 719
  • Item Information Page of First Match PDF Export this Citation
• 13.
  • Review: [untitled] Review: [untitled]
  • Reviewed work(s): A Critical Examination of the Orientation Postulate in Accounting, with Particular Attention to Its Historical Development by Stephen Addam Zeff
  • The Accounting Review, Vol. 54, No. 3 (Jul., 1979), p. 664
  • Item Information Page of First Match PDF Export this Citation
• 14.
  • Two Decades of the Journal of Accounting Research Two Decades of the Journal of Accounting Research
  • Thomas R. Dyckman, Stephen A. Zeff
  • Journal of Accounting Research, Vol. 22, No. 1 (Spring, 1984), pp. 225-297
  • Item Information Page of First Match PDF Export this Citation
• 15.
  • An Analysis of Large Audit Clients An Analysis of Large Audit Clients
  • Stephen A. Zeff, Robert L. Fossum
  • The Accounting Review, Vol. 42, No. 2 (Apr., 1967), pp. 298-320
  • Item Information Page of First Match PDF Export this Citation
• 16.
  • Review: [untitled] Review: [untitled]
  • Frederick D. S. Choi
  • Reviewed work(s): Forging Accounting Principles in Five Countries: A History and an Analysis of Trends by Stephen A. Zeff
  • The Accounting Review, Vol. 48, No. 3 (Jul., 1973), pp. 651-652
  • Item Information Page of First Match PDF Export this Citation
• 17.
  • Review: [untitled] Review: [untitled]
  • H. Thomas Johnson
  • Reviewed work(s): Forging Accounting Principles in Five Countries: A History and an Analysis of Trends by Stephen A. Zeff
  • The Business History Review, Vol. 47, No. 1 (Spring, 1973), pp. 139-140
  • Item Information Page of First Match PDF Export this Citation
• 18.
  • Review: [untitled] Review: [untitled]
  • Stephen A. Zeff
  • Reviewed work(s): A White-Collar Profession: African American Certified Public Accountants since 1921 by Theresa A. Hammond
  • The Journal of Southern History, Vol. 69, No. 4 (Nov., 2003), pp. 969-970
  • Item Information Page of First Match PDF Export this Citation
• 19.
  • Review: [untitled] Review: [untitled]
  • R. G. Walker
  • Reviewed work(s): Forging Accounting Principles in Australia by Stephen A. Zeff
  • The Accounting Review, Vol. 49, No. 4 (Oct., 1974), pp. 893-894
  • Item Information Page of First Match PDF Export this Citation
• 20.
  • Review: [untitled] Review: [untitled]
  • Paul A. Griffin
  • Reviewed work(s): Forging Accounting Principles in New Zealand by Stephen A. Zeff
  • The Accounting Review, Vol. 55, No. 3 (Jul., 1980), pp. 555-556
  • Item Information Page of First Match PDF Export this Citation
• 21.
  • Review: [untitled] Review: [untitled]
  • Richard Vangermeersch
  • Reviewed work(s): Henry Rand Hatfield: Humanist, Scholar, and Accounting Educator by Stephen A. Zeff
  • The Business History Review, Vol. 75, No. 1, Computers and Communications Networks (Spring, 2001), pp. 212-214
  • Item Information Page of First Match PDF Export this Citation
• 22.
  • Review: [untitled] Review: [untitled]
  • Stephen A. Zeff
  • Reviewed work(s): The History of the Institute of Chartered Accountants in England & Wales, 1880-1965, & Its Founder Accountancy Bodies, 1870-1880 by Harold Howitt
  • The Business History Review, Vol. 43, No. 1 (Spring, 1969), pp. 99-100
  • Item Information Page of First Match PDF Export this Citation
• 23.
  • Review: [untitled] Review: [untitled]
  • Stephen A. Zeff
  • Reviewed work(s): Encyclopaedia of Accounting by George Lisle
  • The Accounting Review, Vol. 67, No. 4 (Oct., 1992), pp. 876-878
  • Item Information Page of First Match PDF Export this Citation
• 24.
  • Review: [untitled] Review: [untitled]
  • Charles T. Zlatkovich
  • Reviewed work(s): Essays in Honor of William A. Paton by Stephen A. Zeff; Joel Demski; Nicholas Dopuch
  • The Accounting Review, Vol. 55, No. 3 (Jul., 1980), pp. 556-557
  • Item Information Page of First Match PDF Export this Citation
• 25.
  • Review: [untitled] Review: [untitled]
  • Stephen A. Zeff
  • Reviewed work(s): Accounting and the Law: A Collection of Essays by Sidney I. Simon
  • The Accounting Review, Vol. 41, No. 4 (Oct., 1966), pp. 825-826
  • Item Information Page of First Match PDF Export this Citation

  This listing proceeds for over 100 articles by Steve or articles that cite Stephen A. Zeff. I merely provided the
  above first page to show you what type of things come out of a Jstor search.

I then clicked on Item 8 above and downloaded the Zeff article I was most interested in at the moment.

I also went back to the Jstor search page and did a search for "William A. Paton" and got a listing of hits of some of Bill's papers and papers that cite Bill Paton. One that particularly intrigues me is the following"
"Statement by William A. Paton," by William A. Paton, The Accounting Review, October 1980, pp. 629-630.

Bill was 91 years old when he wrote the above short piece. What intrigues me is how he reflects on his famous 1940 monograph written with A.C. Littleton in 1940 that he claims to have not read once again for 35 years. It's rumored that he "recanted" his authorship of that most famous monograph, but that could not be further from the truth. He feels that he and "A.C." "did a creditable job" and then proceeds to point out where he feels, after 40 years, that this most famous monograph had some flaws.

I will eventually discuss these flaws in another message to the AECM after I've had time for study on this matter.
The purpose of this message is to point out how much fun historical research can be in what becomes, if you keep going, a process of serendipity that reveals what a huge amount we think of as current thinking was thought of decades ago by some very smart writers.

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From the Harvard Business School
Buy Now, Pay Later: A History of Personal Credit --- http://www.library.hbs.edu/hc/credit/

Jensen Comment
When teaching about accounting for liabilities and credit cards, it might be interesting to introduce students to the history of liabilities ---
Buy Now, Pay Later: A History of Personal Credit --- http://www.library.hbs.edu/hc/credit/

Bob Jensen's threads on accounting history ---
http://www.trinity.edu/rjensen/Theory01.htm#AccountingHistory

---

Historical Myth a Month (with a Nevada focus) ---
http://nsla.nevadaculture.org/index.php?option=com_content&task=view&id=683&Itemid=418

The above site has nothing to do with accounting, but it struck me as an interesting way to introduce accounting history into most any accounting course. For assignments (maybe for each class) students could be asked to verify accounting history myths.

Bob Jensen's threads on accounting history ---
http://www.trinity.edu/rjensen/Theory01.htm#AccountingHistory

Bob Jensen's threads on Tools and Tricks of the Trade ---
http://www.trinity.edu/rjensen/000aaa/thetools.htm

---

Early accounting was a knotty issue
South American Indian culture apparently used layers of knotted strings as a complicated ledger.
Two Harvard University researchers believe they have uncovered the meaning of a group of Incan khipus, cryptic assemblages of string and knots that were used by the South American civilization for record-keeping and perhaps even as a written language. Researchers have long known that some knot patterns represented a specific number. Archeologist Gary Urton and mathematician Carrie Brezine report today in the journal Science that computer analysis of 21 khipus showed how individual strings were combined into multilayered collections that were used as a kind of ledger.
Thomas H. Maugh, "Researchers Think They've Got the Incas' Numbers," Los Angeles Times, August 12, 2005 ---
http://www.latimes.com/news/science/la-sci-khipu12aug12,1,6589325.story?coll=la-news-science&ctrack=1&cset=true
Also note http://snipurl.com/incaknots   [64_233_169_104

Jensen Comment:  I'm told that accounting tallies in Africa and other parts of the world preceded written language.  However, tallies alone did not permit aggregations such as accounting for such things as three goats plus sixty apples.   Modern accounting awaited a combination of the Arabic numbering ( http://en.wikipedia.org/wiki/Arabic_numbers ) and a common valuation scheme for valuing heterogeneous items (e.g., gold equivalents or currency units) such that the values of goats and apples could be aggregated.  It is intriguing that Inca knot patterns were something more than simple tallies since patterns could depict different numbers and aggregations could possibly be achieved with "multilayered collections."

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"Effective” Genealogical History: Possibilities for Critical Accounting History Research," by Norman B. Macintoch, Accounting Historians Journal, June 2009 ---
http://umiss.lib.olemiss.edu:82/articles/1038280.7113/1.PDF

Abstract: This essay, following up on the recent Sy and Tinker [2005] and Tyson and Oldroyd [2007] debate, argues that accounting history research needs to present critiques of the present state of accounting’s authoritative concepts and principles, theory, and present-day practices. It proposes that accounting history research could benefit by adopting a genealogical, “effective” history approach. It outlines four fundamental strengths of traditional history – investigate only the real with facts; the past is a permanent dimension of the present; history has much to say about the present; and the past, present, and future constitute a seamless continuum. It identifies Nietzsche’s major concerns with traditional history, contrasts it with his genealogical approach, and reviews Foucault’s [1977] follow up to Nietzsche’s approach. Two examples of genealogical historiography are presented – Williams’ [1994] exposition of the major shift in British discourse regarding slavery and Macintosh et al.’s [2000] genealogy of the accounting sign of income from feudal times to the present. The paper critiques some of the early Foucauldian-based accounting research, as well as some more recent studies from this perspective. It concludes that adopting a genealogical historical approach would enable accounting history research to become effective history by presenting critiques of accounting’s present state.

What Went Wrong With Accountics Research? ---
http://www.trinity.edu/rjensen/Theory01.htm#WhatWentWrong

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You may want to liven up your accounting, math or history courses by illustrating the art and science of the Abacus Calculator

Abacus: The Art of Calculating with Beads --- http://www.ee.ryerson.ca/~elf/abacus/index.html

Contents

Introduction

Construction  ·  Basics  ·  Java Applet  ·  Technique  ·  The Abacus Today

History

Timeline  ·  Salamis Tablet  ·  Counting Board  ·  Roman Hand Abacus  ·  Suan Pan  ·  Soroban  ·  Schoty  ·  Nepohualtzitzin  ·  Khipu  ·  Lee Abacus
 

Interactive Abacus Tutor

Sarat Chandran and David A. Bagley's incredible Java abacus with a built-in tutor for counting, addition and subtraction.

Calculations
Addition  ·  Subtraction  ·  Multiplication & Division  ·  Square Roots  ·  Cube Roots

The Lee Abacus

The manual for the Lee Abacus, c. 1958 is available as Text  ·  Images

 

The Abacus as Art

Michael Mode builds exotic abaci as art objects.

 

Abacus: Mystery of the Bead

Abacus Techniques by Totton Heffelfinger & Gary Flom.

Articles, Excerpts and Analysis

The Abacus vs.The Electric Calculator

In 1946, a contest held in Tokyo, pitted an abacus against an electric calculator; the abacus won, of course.
 

Feynman vs. The Abacus

Richard Feynman battles against the abacus; the result is not surprising (if you know Feynman).
 

Comparing the Chinese and the Mesoamerican Abacus

An analysis contributed by David B. Kelley.

 

The Roman Hand-Abacus

An analysis contributed by Steve Stephenson.

 

The Incan Khipu

String, and Knot, Theory of Inca Writing by John Noble Wilford.
Talking Knots of the Incas by Viviano and Davide Domenici.

 

Lost Tribes, Lost Knowledge

An article about the dangers of forgetting knowledge learned from the past, by Eugene Linden.

All Things Abacus

Additional Abacus Resources

Purchase  or build an abacus  ·  An abacus for your Palm  ·  Books about the abacus  ·  Java applet source code  ·  The Mesoamerican abacus
 

Resources For Teachers