Bob Jensen's New Bookmarks on June 30, 2008
Bob Jensen at Trinity University 

For earlier editions of Tidbits go to http://www.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm

Many useful accounting sites (scroll down) --- http://www.iasplus.com/links/links.htm

I have an academic dilemma that I will share below. I sent a letter to the authors of a Teaching Note (case solution) urging them to withdraw the Teaching Note and correct some mistakes that I described to them in my February 26 letter. . They did not do so, so you can read below about what happened next:

1. Issues in Accounting Education (IAE) is one of my favorite journals, in part because it is more open to wide ranging research methodologies than all other research publications of the American Accounting Association (AAA)
    

2. The current February 2008 issue has an excellent printed Teaching Case:
   
   "Accounting for Derivatives and Hedging Activities: Comparison of Cash Flow versus Fair Value Hedge Accounting" Issues in Accounting Education, Vol. 23, No. 8, February 2008, pp. 103-117 --- http://aaahq.org/pubs.cfm
    

3. A Teaching Note (case solution) is available AAA members who pay a fee for an electronic subscription to this publication. There are no restrictions on who can be an AAA member and subscribe to IAE. Hence anybody in the world can download the Teaching Note as an electronic subscriber --- Subscribers may go to http://www.atypon-link.com/AAA/doi/pdf/10.2308/tnae.2008.23.1.13
   Also see http://aaahq.org/pubs.cfm
    

4. I studied this Teaching Note carefully and found, in my opinion, both serious errors and misleading assumptions. I communicated these as an error-correcting working paper to both the authors of the published Teaching Note and to the Editor of IAE. I suggested that my error corrections be appended at the end of the original Teaching Note. This would not be hard to do since the Teaching Note can only be downloaded on the Internet. Unlike the Teaching Case itself, the Teaching Note was not distributed in hard copy.
    

5. The IAE Editor informed me that my working paper would be appended to the Teaching Note. However, weeks turned into months and nothing happened. When I inquired the IAE Editor informed me that he’d had a change of heart. What was rude is that he never bothered to inform me of this until I inquired why no appendix was added to the Teaching Note.
    

6. The Editor of IAE  later informed me that he will not append my error corrections to the end of the Teaching Note until I pay a submission fee to have my submission formally refereed. It makes perfect sense that the working paper should be refereed before IAE publishes it as an appendix to the Teaching Note. However, it's ludicrous that, if I want the IAE to correct the IAE's own mistakes, I must pay the IAE to merely consider correcting its own mistakes."
   Submission fees range from $75 to $100 --- https://aaahq.org/AAAforms/journals/iaesubmit.cfm
    

7. I might add that I'm willing to make referee-suggested corrections to my own errors. However, this is not a mainline publication, and I refuse to spend more time word crafting this error-correcting working paper. One of the most difficult aspects of publishing mainline journal articles is satisfying referees who often have differing viewpoints on how the paper should be word crafted. I've just signed a contract to write a book on derivative financial instruments and hedging activities and do not have the time or inclination to word craft this error-correcting working paper. I think the editor of the IAE feels that my use of the word "errors" will embarrass the Case authors. I did make an effort to only use the word "error" when there was what I consider to be an outright error such as using cash flow hedging journal entries for a hedged item that has no cash flow risk. I refuse to call outright errors differences in assumptions when they are in fact errors. When there were differing assumptions I did not call those "errors."
    

8. The Editor may one day have a change of heart about making me pay a submission fee to get the IAE to correct its own mistakes and to word craft the paper to take out the word "error" wherever it appears. Otherwise what are serious errors, in my viewpoint, will live on forever in the Teaching Note to what is otherwise a very good Teaching Case. The Case authors could also rewrite their original Teaching Note, but across several months of communications between us they've never proposed doing so to me or the IAE editor. It would take a substantial effort to rewrite the Teaching Note, and there are complications that arise in that some problems in the Case itself are impossible to correct since the Case has already been distributed as hard copy.
    

9. This could be success arising from troubles turned inside out. In my viewpoint comparing my error-correction working paper with the original Teaching Note has value-added beyond what a perfectly rewritten Teaching Note would make to the Teaching Case. In other words, students and instructors can learn more by studying the errors themselves in the original Teaching Note. This is what I mean by turning troubles inside out to create success. For this reason you should download the current Teaching Note to keep in your own archives just in case it gets laundered later on --- http://aaahq.org/pubs.cfm 
    

10. I think both teachers and students may be misled by the current Teaching Note that can be downloaded from http://aaahq.org/pubs.cfm
    If you are using this Teaching Note, you may download, for free, my error corrections at http://www.trinity.edu/rjensen/CaseErrors.htm
     

11. My error-correcting working paper is designed to be used alongside the electronically published Teaching Note. My working paper will not make much sense to readers who do not have both the Teaching Case and the original Teaching Note for comparative purpose. The original Teaching Note has many things that are very good. I did not find errors in everything contained in the Teaching Note.
     

12. Of course my proposed error-correcting working paper contains only my opinions and could itself have errors that I do not yet know about.
    You be the judge at http://www.trinity.edu/rjensen/CaseErrors.htm
    Please let me know if you find errors in my work since my working paper can be easily corrected at this point.
     

13. Even if the IAE Editor has a change of heart and is willing to have my error-correcting working paper refereed for free, the process could take many months, possibly over a year, before my working paper is appended to the Teaching Note. If you are using this Teaching Case, you probably should take a look at http://www.trinity.edu/rjensen/CaseErrors.htm
    That in fact is my main purpose for writing the above message!

    Postscript 01
    After I circulated this message among some friends, one wrote back and wondered if Science Magazine and the the New England Journal of Medicine charges for correcting their mistakes? We're in deep trouble if that's the case.

    Postscript 02
    My message on this in the last edition, April 30, of New Bookmarks caused the IAE Editor to have a change of heart. My error-correcting working paper has been sent (at no charge to me) out for review. The original Teaching Case authors have had a change of heart and are now willing to substitute their original Teaching Note with a revised version that weaves in my suggestions. However, this process will take many months. Users of the existing Teaching Note are still advised to go to http://www.trinity.edu/rjensen/CaseErrors.htm

Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   
 

Bob Jensen's various threads --- http://www.trinity.edu/rjensen/threads.htm
       (Also scroll down to the table at http://www.trinity.edu/rjensen/ )

Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm

Click here to search this Website if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Home Page is at http://www.trinity.edu/rjensen/

CPA Examination --- http://en.wikipedia.org/wiki/Cpa_examination

Wikipedia has a rather nice summary of accounting software at http://en.wikipedia.org/wiki/Accounting_software

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

Bob Jensen's accounting theory summary --- http://www.trinity.edu/rjensen/Theory.htm

Tom Selling's blog The Accounting Onion (great on theory and practice) --- http://accountingonion.typepad.com/

XBRL Networking --- http://xbrlnetwork.ning.com/

From EDGAR Online
FREE access to the latest ANNUAL REPORTS and PROSPECTUSES from hundreds of publicly traded companies and funds.

Truth in Accounting or Lack Thereof in the Federal Government (Former Congressman Chocola) --- http://www.youtube.com/watch?v=NWTCnMioaY0 
Part 2 (unfunded liabilities of $55 trillion plus) --- http://www.youtube.com/watch?v=1Edia5pBJxE
Part 3 (this is a non-partisan problem being ignored in election promises) --- http://www.youtube.com/watch?v=lG5WFGEIU0E

Watch the Video of the non-sustainability of the U.S. economy (CBS Sixty Minutes TV Show Video) ---
http://www.youtube.com/watch?v=OS2fI2p9iVs 
Also see "US Government Immorality Will Lead to Bankruptcy" in the CBS interview with David Walker --- http://www.youtube.com/watch?v=OS2fI2p9iVs
Also at Dirty Little Secret About Universal Health Care (David Walker) --- http://www.youtube.com/watch?v=KGpY2hw7ao8

Accountancy Discussion ListServs:

For an elaboration on the reasons you should join a ListServ (usually for free) go to   http://www.trinity.edu/rjensen/ListServRoles.htm

AECM (Educators)  http://pacioli.loyola.edu/aecm/  AECM is an email Listserv list which provides a forum for discussions of all hardware and software which can be useful in any way for accounting education at the college/university level. Hardware includes all platforms and peripherals. Software includes spreadsheets, practice sets, multimedia authoring and presentation packages, data base programs, tax packages, World Wide Web applications, etc Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm

CPAS-L (Practitioners) http://pacioli.loyola.edu/cpas-l/  CPAS-L provides a forum for discussions of all aspects of the practice of accounting. It provides an unmoderated environment where issues, questions, comments, ideas, etc. related to accounting can be freely discussed. Members are welcome to take an active role by posting to CPAS-L or an inactive role by just monitoring the list. You qualify for a free subscription if you are either a CPA or a professional accountant in public accounting, private industry, government or education. Others will be denied access.

Yahoo (Practitioners)  http://groups.yahoo.com/group/xyztalk This forum is for CPAs to discuss the activities of the AICPA. This can be anything  from the CPA2BIZ portal to the XYZ initiative or anything else that relates to the AICPA.

AccountantsWorld  http://accountantsworld.com/forums/default.asp?scope=1  This site hosts various discussion groups on such topics as accounting software, consulting, financial planning, fixed assets, payroll, human resources, profit on the Internet, and taxation.

Business Valuation Group BusValGroup-subscribe@topica.com  This discussion group is headed by Randy Schostag [RSchostag@BUSVALGROUP.COM]

Tidbits Directory for Earlier Months and Years --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

New Bookmarks Directory for Earlier Months and Years --- http://www.trinity.edu/rjensen/Bookurl.htm

Fraud Updates is now available at http://www.trinity.edu/rjensen/FraudUpdates.htm

Links to my other fraud modules can be found at http://www.trinity.edu/rjensen/Fraud.htm

Bob Jensen's Threads --- http://www.trinity.edu/rjensen/Threads.htm

Bob Jensen's new timeline on the worldwide scandals using derivative financial instruments and the evolution of accounting standards for derivatives --- http://www.trinity.edu/rjensen/FraudRotten.htm

Links to Documents on Fraud --- http://www.trinity.edu/rjensen/Fraud.htm

Bob Jensen's complete set of Enron Updates are at http://www.trinity.edu/rjensen/FraudEnron.htm#EnronUpdates

Bob Jensen's threads on the Enron scandal are at http://www.trinity.edu/rjensen/FraudEnron.htm

Large International Accounting Firm History --- http://en.wikipedia.org/wiki/Big_Four_auditors

Global Perspectives on Accounting Education --- http://gpae.bryant.edu/%7Egpae/content.htm

A Vision of Students Today (Video) --- http://www.youtube.com/watch?v=dGCJ46vyR9o

Humor Between June 1 and June 30, 2008 --- http://www.trinity.edu/rjensen/book08q2.htm#Humor063008

Humor Between May 1 and May 31, 2008 --- http://www.trinity.edu/rjensen/book08q2.htm#Humor053108

Humor Between May 1 and May 31, 2008 --- http://www.trinity.edu/rjensen/book08q2.htm#Humor053108

Humor Between April 1 and April 30, 2008 --- http://www.trinity.edu/rjensen/book08q2.htm#Humor043008

Humor Between March 1 and March 31, 2008 --- http://www.trinity.edu/rjensen/book08q1.htm#Humor033108

Humor Between February 1 and February 29, 2008 --- http://www.trinity.edu/rjensen/book08q1.htm#Humor022908   

Humor Between January 1 and January 31, 2008 --- http://www.trinity.edu/rjensen/book08q1.htm#Humor013108  

Tidbits Directory for Earlier Months and Years --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

Congratulations to Herb and Lenore Miller

Denny Beresford informed me that Herb and Lenore Miller will celebrate their 70th anniversary on July 1 in Athens, Georgia where he retired from the University of Georgia quite a few years ago.

Herb was the co-author on the famous and successful and highly lucrative Finney and Miller textbook series. Lenore was an accountant who added more than her share to those textbooks as well. Herb's interests ranged from playing the clarinet in a dance band to working in the racing pit of AJ Foyt to frequent golf with close friends like James Don Edwards. Herb and Lenore were both excellent bridge players in their younger days before Herb's eyes became weak.

Herb was a visiting professor at Stanford when I was finishing my PhD. He motivated me to take my first full-time faculty appointment where he was a senior accounting professor --- Michigan State University. Herb and Lenore were instrumental is getting me to forget my skiing and horse raising dreams in favor of digging in to the drudgeries, albeit rewarding drudgeries, of accounting research. I never looked back!

You can read more details about Herb in his Accounting Hall of Fame page at
http://fisher.osu.edu/departments/accounting-and-mis/the-accounting-hall-of-fame/membership-in-hall/herbert-elmer-miller/
Herb was born August 11, 1914, so you go figure. Lenore grew up in Humboldt, Iowa less than 30 miles from where I grew up, although I did not know her until we met years later at Stanford.

Herb served as President of the American Accounting association 1965-1966 during which The Accounting Review  was published four times with gold covers to celebrate the Golden Anniversary of the AAA. Now Herb and Lenore are only five years away from their own Diamond Anniversary. I wish with all my heart that they will celebrate that event on July 1, 2013.

There's Love --- http://www.youtube.com/watch?v=m7050D2sVFc

Action Needed to Avoid Mission Failure
Having a major governmental accounting-type problem on CPA examinations bolstered this module in most U.S. accounting education programs, but it most likely is tokenism compared to the sink hole forming in our Federal, state, and local governments. Much of our hope for the future depends upon having a more stable, enlightened, dedicated, ethical, and knowledgeable body of civil service workers to keep our naive and often corruptible elected officials from losing this nation.

The problem is that it really takes no expertise to run for any elected office. We're in a bigger mess when the government civil service is cannot counter the ignorance and ethically-challenged elected leaders.

"Action Needed to Avoid Mission Failure,' Warns Study," AccountingEducation.com, June 26, 2008 ---
http://accountingeducation.com/index.cfm?page=newsdetails&id=147252 

Identifying the new skills and competencies that federal financial managers will need to face 21st century challenges is the focus of a research paper released recently by the AGA (Association of Government Accountants).

21st Century Financial Managers: A New Mix of Skills and Educational Levels? warns that with 60 percent of the US workforce eligible for retirement over the next 10 years and the commensurate mass retirement of skilled and experienced government financial managers, federal agencies could be left vulnerable to mission failure.

According to AGA Director of Research Anna Miller, "This report is of particular importance given the magnitude of the anticipated problem. The study highlighted those areas in which we must act if we are to avoid compromising standards of accountability and transparency to taxpayers."

Continued in article

The Association of Government Accountants --- http://www.agacgfm.org/homepage.aspx

The U.S. is now dangling on a debt and accountability cliff on the side of that sink hole, and virtually none of our presidential or congressional candidates for office are willing to face these issues because the voters themselves won't have any part of sacrificing to save our great nation.

Truth in Accounting or Lack Thereof in the Federal Government (Former Congressman Chocola) --- http://www.youtube.com/watch?v=NWTCnMioaY0 
Part 2 (unfunded liabilities of $55 trillion plus) --- http://www.youtube.com/watch?v=1Edia5pBJxE
Part 3 (this is a non-partisan problem being ignored in election promises) --- http://www.youtube.com/watch?v=lG5WFGEIU0E

Watch the Video of the non-sustainability of the U.S. economy (CBS Sixty Minutes TV Show Video) ---
http://www.youtube.com/watch?v=OS2fI2p9iVs 
Also see "US Government Immorality Will Lead to Bankruptcy" in the CBS interview with David Walker --- http://www.youtube.com/watch?v=OS2fI2p9iVs
Also at Dirty Little Secret (David Walker) --- http://www.youtube.com/watch?v=KGpY2hw7ao8

At the moment the overwhelming majority of our top accounting graduates do not aspire to civil service.
Therein lies much of the problem for our future.

June 27, 2008 reply from Richard C. Sansing [Richard.C.Sansing@TUCK.DARTMOUTH.EDU]

And now, a rebuttal from the late George Carlin.

"Now, there's one thing you might have noticed I don't complain about: politicians. Everybody complains about politicians. Everybody says they suck. Well, where do people think these politicians come from? They don't fall out of the sky. They don't pass through a membrane from another reality. They come from American parents and American families, American homes, American schools, American churches, American businesses and American universities, and they are elected by American citizens. This is the best we can do folks. This is what we have to offer. It's what our system produces: Garbage in, garbage out. If you have selfish, ignorant citizens, you're going to get selfish, ignorant leaders. Term limits ain't going to do any good; you're just going to end up with a brand new bunch of selfish, ignorant Americans. So, maybe, maybe, maybe, it's not the politicians who suck. Maybe something else sucks around here... like, the public. Yeah, the public sucks."

Richard C. Sansing
Professor of Accounting
Tuck School of Business at Dartmouth
100 Tuck Hall Hanover, NH 03755

Jensen Comment
You can watch George Carlin saying this on video at http://www.youtube.com/watch?v=SlXoIVLJWCY

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

Soto’s quotation below was forwarded to me by Denny Beresford. The question was what Soto would like to be if he wasn’t in professional baseball.
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 baseball), as quoted in in an interview with Mary Burns in Sports Illustrated, June 2008
 

Jensen Comment 1
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.

Jensen Comment 2
There are some well-known accountants and accounting professors who lived in accounting but dreamed of being sports heroes. My best example is Herb Miller who looked like an accountant, spoke like an accountant, and was a very, very good accountant but spent many hours throughout much of his life daydreaming about being a race car driver. Herb lived out his daydreams somewhat by becoming close friends with A.J. Foyt and occasionally being present in Foyt’s pit during actual races. I think Herb’s assigned job was to stay out of the way.

You can read about A.J. Foyt at http://en.wikipedia.org/wiki/A._J._Foyt

You can read about Herb Miller at
http://fisher.osu.edu/departments/accounting-and-mis/the-accounting-hall-of-fame/membership-in-hall/herbert-elmer-miller/

From the Publisher of the AccountingWeb on June 19, 2008

Some friends of ours are currently on vacation in Russia, which got me to thinking, "I wonder what it's like to be an accountant in Russia?" I have no idea. It wasn't all that long ago that International Financial Reporting Standards were adopted by the Russian Finance Ministry, so it's probably been a rather challenging profession as of late! If you have any first-hand knowledge of accounting in the Russian Federation, please e-mail me so we can share it with AccountingWEB readers.

In the meantime, here are some key Russian facts:

• Population: 142 million
• Largest city (and capital): Moscow
• Second largest city:
  St. Petersburg
• Size: the largest country in the world by more than 2.5 million square miles
• Ethnic groups:
  Russian 79.8%,
  Tatar 3.8%,
  Ukrainian 2%,
  other 14.4%

Rob Nance
Publisher
AccountingWEB, Inc.
publisher@accountingweb.com

Bob Jensen's reply to Rob Nance

Hi Rob,

A better question is to ask what accounting became in Russia after the breakup of the Soviet Union --- http://www.worldbank.org/html/prddr/trans/janfeb99/pgs22-25.htm
The system is highly geared to tax reporting and has a long ways to go relative to IFRS.

Accounting in the former Soviet Union was pretty much an exercise in tabulating fiction --- http://www.questia.com/PM.qst?a=o&d=6827120

Accounting was an instrument of the planning and control process that substituted for market-based controls ---
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-6281.1974.tb00002.x?cookieSet=1&journalCode=abac

Russia now has offices of the Big 4 accounting firms and maybe other Western CPA firms as well. One of my former students accepted a transfer to the PwC office in Moscow. It proved to be a fast-track to becoming a partner in PwC. Russian companies are seeking equity investors throughout the world, and to do so they have to add accounting assurances much like the other companies in the global economy seek assurances.

KPMG has a publication comparing IFRS with Russian GAAP --- http://snipurl.com/russiangaap 
Also see http://www.kpmg.ru/index.thtml/en/services/assurance/IFRS/IFRSpublications/

PwC has an IFRS Transition document at http://www.pwc.com/extweb/service.nsf/docid/90828387207B28F78025717B0038B2AD
Results of a 2006 survey are reported at http://snipurl.com/russiangaapsurvey

Deloitte links to a Russian translation of IFRS as well as providing information on transitioning to IFRS in Russia --- http://www.iasplus.com/country/russia.htm

A illustrative Russian set of financial statements can be found at http://www.dixy.ru/en_invest-report/

Hope this helps!

Bob Jensen's threads on accounting history, theory, and controversies --- http://www.trinity.edu/rjensen/Theory01.htm

Bob Jensen's threads on accounting firm scandals and lawsuits --- http://www.trinity.edu/rjensen/Fraud001.htm

Bob Jensen's homepage with links to a lot of other accounting documents --- http://www.trinity.edu/rjensen/

SmartPros has an interesting site for students --- http://accounting.smartpros.com/accountingstudents.xml

AccountingWeb Student Zone --- http://www.accountingweb.com/news/student_zone.html

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

New IFRS XBRL Taxonomy Released --- http://accounting.smartpros.com/x62326.xml

Chronology of IFRS standards --- http://www.iasplus.com/restruct/chrono.htm

Iraq Stock Exchange Registrants Must File Financial Reports Under IFRS Accounting
We have created a new Jurisdiction Page for Iraq. Under the Iraq securities markets law, all companies listed for trading on the Iraq Stock Exchange are required to publish financial statements that are prepared in accordance with International Financial Reporting Standards. Those statements must be audited in accordance with International Standards on Auditing. Further, the Iraq banking law (administered by the Central Bank of Iraq) requires all banks to publish IFRS financial statements. We have updated our table of Use of IFRSs by Jurisdiction.
IASPlus blog from Deloitte, June 17, 2008 --- http://www.iasplus.com/index.htm

Iran has some issues with IFRS convergence but is at least considering the possibility of convergence, unlike Saudi Arabia, Japan, and Iceland that appear to be giving IFRS less consideration --- http://www.iasplus.com/resource/gaap2002.pdf

Iran has an Institute of Certified Accountants --- http://www.iasplus.com/index.htm
Professional Accountancy groups in other nations are listed at http://www.iasplus.com/links/links.htm

Many other useful accounting sites (scroll down) --- http://www.iasplus.com/links/links.htm

Deloitte also publishes an extensive Global Outlook document, although I've not found updates since 2006 --- http://www.iasplus.com/resource/0511econoutlook2006.pdf
This is a very, very useful document about global economic opportunities and risks.

Directories --- http://dir.yahoo.com/Business_and_Economy/Directories/ 

CIA World FactBook --- https://www.cia.gov/cia/publications/factbook/index.html

Bob Jensen's links to economic, accounting, and finance statistics --- http://www.trinity.edu/rjensen/Bookbob1.htm#EconStatistics

Congratulations to San Diego State University's School of Accountancy

Accounting school receives $10 million donation
San Diego State University has received a $10 million gift to name the university's nationally recognized school of accountancy the Charles W. Lamden School of Accountancy. The gift, among the largest in university history, was made by Gertrude Lamden in honor of her late husband who was instrumental in launching SDSU's College of Business Administration.

Organization, Compensation, and Litigation in the Large Public Accounting Firms

A very good friend sent this message to me:

Bob,

See - http://thecaq.org/publicpolicy/treasurydata.htm 

Some great information about the organization of major accounting firms, their finances (including average partner comp) and litigation.

Question
Is the present audit model broken?

No New Protections to Protect the Big Four International Auditing Firms from Insolvency
"A New Big Eight: Suggesting a Deal the Big Four Can’t Refuse," by Tom Selling, The Accounting Onion, June 22, 2008 ---
http://accountingonion.typepad.com/

Jim Peterson, who blogs on the auditing profession, has written an excellent summary and analysis of the failure of the U.S. Treasury Department's Advisory Committee on the Auditing Profession to recommend a solution to the Big Four’s exposure to liabilities that threaten their solvency.  Jim's blog, Re:Balance, is worth reading simply out of appreciation for Jim’s elegant writing style.  Also, check out his funky bow tie!

“Did anyone really think that the endless chatter about saving the system of privately-provided audits for large global companies would come to anything? ….

…those sincerely believing in the importance of large-company assurance are avoiding an election between two unappealing choices: Either put every effort to assure that the Big Four are insulated from the very catastrophic risks that the critics insist they must remain exposed to, or start the process of designing the new audit model that must arise after the collapse of the Big Four under the abdication of the Treasury Committee and its counterparts.”

I agree with Jim that the current audit model is broken. The notion of independence from management is fatally flawed, and much of what passes for auditing does not create useful information for investors. Ironically, the “services” that merely provide a perfunctory rubber stamp on management’s judgments may create the Big Four's most significant exposures to liability. Walter Schuetze, former SEC Chief Accountant and FASB member, explained this much better than I can in a 2003 speech to the New York State Society of CPAs. The deafening silence in response to his challenge to make audits simpler and more relevant attests to the fact that political will to fight deeply entrenched interests in the current system is virtually non-existent.

Continued in article

Andy Bailey's letter to the Department of the Treasury --- http://www.trinity.edu/rjensen/Bailey2008.htm 

Bob Jensen's threads on professionalism --- http://www.trinity.edu/rjensen/Fraud001.htm#Professionalism

Bob Jensen's threads on accounting careers are at http://www.trinity.edu/rjensen/Bookbob1.htm#careers

Bob Jensen's threads on scandals in the large firms --- http://www.trinity.edu/rjensen/Fraud001.htm

A Timeline of Financial Scandals and Accounting Standards Development --- http://www.trinity.edu/rjensen/FraudRotten.htm#DerivativesFrauds

Big is Sometimes Better When it Comes to Auditing

"PCAOB Inspections of Smaller CPA Firms: Initial Evidence from Inspection Reports," by Dana R Hermanson, Richard W Houston and John C Rice, Accounting Horizons, June 2007 --- http://www.atypon-link.com/AAA/doi/abs/10.2308/acch.2007.21.2.137

We examine 316 Public Company Accounting Oversight Board (PCAOB) inspection reports issued to smaller CPA firms (100 or fewer issuer clients) through July 2006. We find that 60 percent of the inspected firms have audit deficiencies. Firms with audit deficiencies are smaller, have a larger number of issuer clients, and are growing more rapidly than firms without deficiencies, suggesting an over-extension into the issuer client market by some firms. Deficiencies are more likely for inspections conducted in 2004 than 2005, and the PCAOB appears to have targeted smaller, riskier, rapidly growing audit firms for its 2004 inspections. In addition, we find some evidence that clients of deficiency firms are smaller, less profitable, and more highly leveraged. We also summarize the most common audit deficiencies and offer implications and directions for future research.

"Accounting for Second Life," by Richard A. Johnson and Joyce M. Middleton, Journal of Accountancy, June 2008 --- http://www.aicpa.org/pubs/jofa/jun2008/second_life.htm 

EXECUTIVE SUMMARY

Second Life is a virtual world with education, public relations, and economic implications. CPA Island is the center of the public accounting profession in Second Life.

At a minimum, CPA Island presents a creative communication medium to appeal to a new generation. This generation has grown up with high-speed Internet connectivity, instant messaging, and multiplayer online gaming.

The spirit behind CPA Island goes beyond clearly demonstrating an awareness of the different skill set of this new generation. It embraces and celebrates these skills as important to the future of the accounting profession.

The economic implications of Second Life are just now unfolding. Suspend disbelief, log on, and experience CPA Island and the other aspects of Second Life for yourself.

Bob Jensen's threads on Second Life virtual worlds are at http://www.trinity.edu/rjensen/000aaa/thetools.htm#SecondLife

"Accounting Grads Are Most Employable: Survey," SmartPros, May 27, 2008 --- http://accounting.smartpros.com/x61963.xml

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

Roger Collins called my attention to this link.

Where is insider trading more evident and difficult to stop than in the U.S. capital markets --- well England for one
"Bradford & Bingley: Time the FSA got serious on insider trading," by Martin Waller, London Times, June 6, 2008 --- http://business.timesonline.co.uk/tol/business/columnists/article4076208.ece

Bob Jensen's Rotten to the Core threads are at http://www.trinity.edu/rjensen/FraudRotten.htm

Accounting Golden Fleece Quotations (read that bull crap)

I want to conclude by explaining what I mean by "truly believe." I'm just a politician ... whoops, I mean lawyer ... who really doesn't know much about what all you CFOs have to go through to make your numbers. Frankly, the details of the differences between IFRS and U.S. GAAP don't concern me much. I just threw in "truly" to impress upon you that I am on your side -- kind of like "no kidding," or "I swear." In other words, even though I don’t have a single good answer to any of the questions I have raised today, don’t worry, because we're going through with this anyway. I truly believe that If IFRS is good for you, it's good for the SEC; and it must be good for everyone.
John White, Director of the SEC’s Division of Corporation Finance, as quoted by Tom Selling in The Accounting Onion, June 9, 2008 --- http://accountingonion.typepad.com/theaccountingonion/2008/06/accounting-convergence-decoding-john-whites-speech.html

Jensen Comment
The roaring SEC-FASB (read that Cox-Herz) Train replacing domestic accounting standards such as U.S. and Canadian GAAP is analogous to letting the United Nations govern the world. Both the U.N. and the International Accounting Standards Board have lofty intentions, but multinational politics is a nightmare to behold

The IASB defines IFRS as a set of International Financial Reporting Standards --- http://www.iasb.org/Home.htm

Bob Jensen defines IFRS as International Fleecing of Responsible Standards

International auditing firms are seeking a judgmental (read that softer) set of standards under lobbying pressure from their large multinational clients. Bright lines led to $billions of losses in litigation in the U.S. because a client, with the blessing or incompetence of an auditor, crossed a line such as the old SPE 3% line that was a huge factor in the demise of Andersen and Enron --- http://www.trinity.edu/rjensen/Fraud001.htm 

I’m presently doing a funded research study comparing FAS 133 with IAS 39. FAS 133 has lots of bright lines and lots of examples, especially DIG examples, of how to account for complicated hedges.  IAS 39 is like driving down a mountain road on a moonless night without any headlights, road signs, or guard rails. With over a thousand variations of financial instrument derivative contracts and thousands of types hedging strategies, IAS 39 lets clients manage earnings most any way they like without detailed rules of the road and bright lines  that give them and their auditors guidance.

Eventually IFRS will be all fair value accounting on moonless nights. Accountability is going into the ditch or over a cliff --- http://www.trinity.edu/rjensen/theory01.htm#FairValue

David Albrecht forwarded the following link from the Financial Times:

"Accounting rule-makers putting markets at risk," by Michael Starkie, Financial Times,.June 12 2008 --- Click Here

Sir, Whither accounting?

I write this letter in a personal capacity. My qualifications for expressing these opinions are that I have been chief accountant at BP for the past 14 years and have been for some years chairman of the UK's CBI Financial Reporting Panel and a member of the European Financial Reporting Advisory Group Technical Expert Group.

Recent years have seen major changes in the topography of accounting standards; acceptance by the European Union (subject to endorsement) of International Financial Reporting Standards and by other countries also, and the decline in the influence of US generally accepted accounting principles as the US capital markets have become relatively less attractive.

What a wasted opportunity, then, that the current body of IFRS is so unhelpful for the markets when the accounting world was given this historic opportunity to create something that should have been both useful for markets and with the potential to be welcomed globally. I recall a year or two ago that the heads of leading accounting firms said that current international financial reporting was broken. But nothing has been done about this.

And the future looks even bleaker. The International Accounting Standards Board continues to develop an accounting model about which users of financial information have grave misgivings. Probably the most disturbing example is the use of predominantly mark-to-model exit values in the balance sheet, which cannot be relevant for a market trying to assess the economic performance and position of companies that have the intention of continuing to operate as going concerns. In the interests of brevity I will not list other examples though there are enough voices of protest being raised by those in the financial world to make it apparent that all is far from well.

How have things come to this pass? I have concluded, albeit with regret, that the fundamental problem is the members of the IASB. Collectively as board members they do not have the experience and wisdom to produce and maintain accounting standards that are useful for the capital markets and the wider economy. And some of the board members are clearly committed to an extreme view of recognition and measurement which will severely damage the operation of markets and ultimately economies. Recent appointments to the board are too little and too late to change the overall thrust.

Continued in article

Bob Jensen's threads on controversies in accountancy standard setting are at http://www.trinity.edu/rjensen/theory01.htm#MethodsForSetting

Accounting Golden Fleece Research

June 8, 2008 message from David Albrecht [albrecht@PROFALBRECHT.COM]

I've been thinking quite a bit about the teaching of accounting. In the current environment, I think we have made it more difficult than ever for good teaching to take place. Here are a few 21st century environmental factors, all different in some way (if only in degree) from what we've experienced the past, that I think cause the most difficulty.

(1) Mass education and lack of budget. (2) Lack of respect for seasons of life. (3) Teaching research versus teaching a world-view. (4) Focus on content more focused than ever.

(1) Mass education and lack of budget. These issues have been problematic for decades, but seems to be more critical at the present time. State support of higher education has been on the wane for decades. In the 21st century, states are supporting higher education less than ever. Oh, there are a few stories of states pumping in a few extra dollars on a relative basis, it hasn't seemed to be permanent (see Ohio). Public colleges/universities (in which about 80% of America's freshmen start out) have responded by placing intense pressure on keeping up enrollment (or even expanding) so they can stay solvent. When huge enrollment increases don't materialize, they cut the cost of faculty by (1) reducing lines, and (2) relying more on full-time faculty with non-terminal degrees, and (3) relying on ever more temporary adjuncts. Nearly 20 years ago when I got hired at BGSU, its CBA was proud of 20-25 student sections. This coming fall I'm at 50-60 students across the board (actually been there for a few years). 15+ years ago I helped in the evolutionary development of Monopoly as a teaching tool for financial accounting. Now, I have so many students to teach that I'm reluctant to use it.

How has this made the teaching and learning of accounting more difficult? At a time when we understand much more about teaching and learning and we as professors should doing more with it, too many students and too few colleagues preclude our being able to do much about it.

(2) Lack of respect for seasons of life. I think we as humans are as inherently valuable in a later season of life as in earlier seasons. Having a high number displaying on my odometer of life, I can say with quite a bit of confidence that I'm no longer as attractive and sexy as I fantasize that I once was. I'm also less athletic than I once was. These factors don't make me less valuable as a person. Where once I was loved by older generations of Albrechts, now I'm loved by younger generations of Albrechts, but I'm still loved. 50-something grandfathers don't do the same thing as 20/30-something parents. I shouldn't be judged by the number of diapers I've changed recently, nor the number of school activities I've ferried my children to. My contributions there are in the past.

Thanks to new academic policies, I'm much less likely keep receiving institutional love if I lose attractiveness and sexiness in the publication area. I'm pretty sure that I'm wiser in teaching (made finalist for the university teaching award again) and service than ever, but I lack the ability to garner and focus sufficient energy for research projects requiring longer time horizons. I may not be able to teach from my stock of current research findings, but I'm much wiser and better able to teach from my more fully developed world view. But I'm in an older season of academic life where what I do has changed. If refereed publications for an academic is like supporting school activities for a parent, then why should a senior academic be judged according to a younger academic's activity set?

How does this affect teaching? Just try switching schools based on a teaching record when only publication records matter. At a time when schools could be bidding on my ability to help students learn, they are shunning me for publications. Schools get what they pay for, and they pay for publications and not teaching. Not too long ago I was told that I'd been doing nothing of value. Hmmph, despite being a respected teacher and a respected faculty leader, my activities were valueless. The natural human response is to pack it in. That is what I fear is happening across the country in accounting academia. Lack of respect for later seasons of life has resulted their surgical removal. If senior faculty aren't forced out early, they continue a mere shells of what they once were.

(3) Teaching research versus teaching a world view. The current AACSB focus on professors being qualified to teach is grounded on their possessing a recent track record of research/publication productivity. This is so AACSB schools can advertise their degrees as value added from a knowledge perspective. Given the accounting discipline's many problems in generating research findings of value, if there was any truth to AACSB advertising, then it would tout GIGO (garbage-in, garbage-out). And do current accounting research findings contribute to wisdom? Only to the extent that outsiders can view it and wisely conclude it is in a sorry state.

As a younger academic I was more concerned with how to work in the world. Now I'm concerned about how the world works. After spending more than two decades in trying to make sense of it all, I conclude that I understand something about it. As a younger academic, any comments I would have made about how the world works would have been pure poppycock (this word has an interesting entomology). Moreover, world-views are not publishable and would have been as publishable then as it is now (so I never would have been interested in pursuing it). Never-the-less, at the current time I'm more willing and able to enter into discussions on some topics in which a seasoned world view can lend some insight. Does everyone agree with me? Certainly not. However, some write and tell me they do.

What has this to do with the teaching of accounting and why is teaching/learning now more difficult? Just because a senior academic has few (or none) personal research results from which to teach does not mean that a senior academic has nothing to teach. The focus on teaching research results in not permitting some to teach at all, when other-wise they would still be teaching and presenting a world view. We've thrown the geezers out with the bath water.

(4) Focus on content more focused than ever. Twenty years into an educational revolution, I think the proponents of the two paradigms are more entrenched than ever. Especially in accounting.

Explaining why this is a problem requires some length. Ernest Boyer's seminal work, Scholarship Reconsidered, Priorities of the Professoriate, presented what I view as a holistic view of academia. Trashing the traditional teaching-research-service model as three independent silos, Boyer advocates a view with four areas of scholarship: discovery, integration, application, and teaching. The follow-up by Glassick, Huber and Maeroff, Scholarship Assessed: Evaluation of the Professoriate, discusses how to put Boyer's work into practice. I think a currently popular term, engagement, is an unstated but essential ingredient of the two works.

Barr and Tagg's important work, From Teaching to Learning - A New Paradigm for Undergraduate Education (Change, 1995), firmly a part of the larger Boyer picture, presents how there are really two paradigms in place for undergraduate collegiate education, the traditional content centered (or teacher centered) approach and a newer learning centered ( approach. The essence of the two approaches is that the content centered approach has focus on what students are to know, and the learning centered approach has a focus on what students learn to do with what they know.

Whether or not 21st century academics (accounting and otherwise) have read and reflected on Boyer, they most certainly are aware of the paradigmic struggles. It has seeped in via osmosis, if nothing else. L. Dee Fink (of Creating Significant Learning Opportunities fame) has publicly wondered why the new approach has not caught on across America. I've told him that I think it is because the aging generation of baby-boom academics has viewed it as criticism of their life-long efforts, and this criticism has cut to the bone. Instead of viewing at least parts of the new paradigm with an open mind, they simply are not about to tarnish their careers as they now approach retirement. They are concerned with legacy. Moreover, moving to the new paradigm takes significant mental and physical effort, in decreasing supply as aging baby-boomers get older.

Moreover, the AACSB has set teaching qualifications in terms of knowledge. No where does the AACSB say that to be qualified to teach accounting or business must one actually be able to teach in such a way so that students learn.

I've tried to keep my eyes and ears open. Everywhere I go and everywhere I look I see a wealth of knowledge-oriented, multiple-choice tests. Many of the presentations I see at AAA ELS sessions appear to be bandages for those in the teaching/content paradigm.

What does all of this have to do with teaching accounting? Given that accounting and auditing are two areas undergoing rapid change, and the current educational environment detracts from our ability to send out students well-equipped to succeed. In addition, at a time when any change should be welcomed, we are less likely to see it.

David Albrecht
Bowling Green

June 8, 2008 reply from Amy Dunbar [Amy.Dunbar@BUSINESS.UCONN.EDU]

Albrecht wrote:
L. Dee Fink (of Creating Significant Learning Opportunities fame) has publicly wondered why the new approach has not caught on across America. I've told him that I think it is because the aging generation of baby-boom academics has viewed it as criticism of their life-long efforts, and this criticism has cut to the bone.

Dunbar:
I am reading a fascinating book, Mistakes Were Made (but not by me), by Tavris and Aronson. I wonder if I defend my approach to teaching (and a lot of other things) because of self-justification. I think we all deal with cognitive dissonance to some degree by coming up with arguments to support why we are right in what we think or do. The question is where do we draw the line, and how do we know when we should be trying to examine our justifications with an attempt at independence. Self-examination is darn hard.

I remember Wheeler (Michigan) questioning whether the then existing trend of CPA firms to sell product instead of professional services was damaging the independence of CPAs. He was almost booed out of the room by academics. Some of us may have changed our memories of that incident because it seems ludicrous now, at least to me that we didn’t applaud him. Changing with the times was not the thing to do, but how does one know when we should change? Now we say change the way we teach, and no wonder some of us hang on to old ways of doing things. Coming up with reasons why what we are doing could be wrong creates cognitive dissonance!

Amy Dunbar

UConn

 

June 9, 2008 reply from Dennis Beresford [dberesfo@TERRY.UGA.EDU]

One of the network affiliate television stations in Atlanta runs a periodic series of exposes in which they disclose how state provided research dollars are being "wasted" on many projects. The examples are usually those that involve travel expenses and other expenditures for scientific studies that appear to be of dubious value - e.g., the sex life of pigs (I made this up but it's a good example of the type of thing they cover). When I see these stories I wonder what the reporters would think about the dollars going to finance much of accounting research - would that result in the same kind of "outrage" among taxpayer/viewers? On the other hand, the topics studied would usually be so obscure that they wouldn't mean a thing to the viewers of the shows.

Denny Beresford

June 9, 2008 reply from Bob Jensen

Hi Denny,

I think Senator Proxmire probably had some better examples than the "sex life of pigs" since horny pigs might truly be of value to our food supply, especially if pigs' interest in sex wanes. Proxmire's Golden Fleece awards are at http://en.wikipedia.org/wiki/Golden_Fleece_Award

The problem with some, certainly not all, basic research in academe is that when funded it appears to be a waste of money at the time but may become important much later in life. Mathematical proofs are probably the best example. Some proofs of the past were deemed little more than wasted analytics before their importance was discovered centuries later.

As timing luck would have it, Sixty Minutes on CBS had a show related to this topic last night (June 8, 2008) justifying Howard Hughes Medical Research Foundation --- http://www.cbsnews.com/stories/2004/07/13/60minutes/main629388.shtml 

In a surprisingly multi-million dollar way, the multi-billion Howard Hughes Foundation funds basic medical research that cannot get more practically-minded NIH funds or other government grants.

Of course it is always possible to fleece taxpayers and research funding foundations for research that almost certainly fleeces the public with epsilon chance of ever being relevant to the world. I think Bill Proxmire identified many of those fleecing projects; But then again, maybe not in some instances.

Basic research is a service to society so steeped in externalities that it truly defies Adam Smith's "Invisible Hand" --- http://en.wikipedia.org/wiki/Adam_Smith 

My arguments with the takeover of our accounting doctoral programs by accountics professors is not so much that accountics is not worthwhile. My objection is that accountics professors turned these doctoral programs and editorships of some of our leading research journals into their own dysfunctional monopoly on methodology --- http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms 

In other words, it’s the monopoly that's dysfunctional rather than much of the accountics research itself. Having said this, accountics research might have more value if somebody somewhere sometime saw fit to replicate the studies to test for errors in either the data or the models or both.

Maybe somebody in the 23rd Century will find it of great benefit to, for the first time, replicate an accountics research finding in the 20th Century. This happens in mathematics and science. I'm not so optimistic about accounting research where much of the practical value today comes from normative methods and case studies rather than accountics models with hundreds of missing variables.

Bob Jensen.

January 9, 2008 reply from Jagdish Gangolly [gangolly@CSC.ALBANY.EDU]

Denny, Bob,...,

Jensen wrote:
The problem with some, certainly not all, basic research in academe is that when funded it appears to be a waste of money at the time but may become important much later in life. Mathematical proofs are probably the best example. Some proofs of the past were deemed little more than wasted analytics before their importance was discovered centuries later.

I entirely agree. There is a great need for basic as well as applied research. The results of under-investments in basic research shows up in the long run. I can give two examples:

Bell Labs used to be the place to be in most branches of science When the financiers conquered the world and the management adopted tunnel-vision, investments in such research plummeted, and we all know the rest of the story.

Xerox PARC used to be the place to be for any one interested in computing until recently. Mismanagement and tunnel vision led to its demise as a part of Xerox, and we all know the rest of the story.

I could give more examples.

Over the last two decades or so, funding in basic research by corporations has dropped and the void has not been filled. Funding by government too has plummeted. Tragically, the universities have not filled the void.

Two shining examples of support for theoretical research in the corporate sector are Microsoft's Bill Labs, and IBM's Watson Labs.

In case of both, the importance of basic research for the advancement of applied research is recognized. Should we wonder that IBM leads in patent registrations since the lingering death of Bell Labs many years ago? Recently I was at IBM Watson's Hawthorne Labs in West chester, and saw their "patent wall" -- one of the walls on the first floor where each IBM patent is painted in fine print; and they were almost running out of wall space.

Jensen wrote:
My arguments with the takeover of our accounting doctoral programs by accountics professors is not so much that accountics is not worthwhile. My objection is that accountics professors turned these doctoral programs and editorships of some of our leading research journals into their own dysfunctional monopoly on methodology --- http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms

In other words, it's the monopoly that's dysfunctional rather than much of the accountics research itself. Having said this, accountics research might have more value if somebody somewhere sometime saw fit to replicate the studies to test for errors in either the data or the models or both.

Value of basic research is recognised by the society, though at times the idea may be so profoundly subtle that it takes a long time to recognise the use, or if the technologies needed to harness such theoretical results are not developed.

I can give examples of theoretical developments in statistics having to do with data visualisation which were developed a long time ago, and the theoretical developments in mathematical programming that needed advancements in computing technologies. The gap was wider in case of the theoretical results in non-Euclidean geometries to find their realisation in data visualisation.

Accounting is a different story altogether. Most financial accounting research resembles alchemy, theology, or simply voodoo magic. In fact, I think financial accounting is a theory-less discipline devoid of any ACCOUNTING implications (I am being deliberately provocative).

In accounting academia, we are also a practice-less discipline. We flagrantly ignore practice and in fact denigrate it. I am not being provocative here, just being truthful.

Jagdish

"The Revisions to IFRS 3:  Bad Enough to Abandon Faith in IFRS?" by Tom Selling, The Accounting Onion, June 16, 2008 --- http://accountingonion.typepad.com/theaccountingonion/2008/06/ifrs-3-fall-short-of-convergence-again.html

In my previous post, I described how an SEC honcho, while speaking to the choir at an event sponsored by FEI, espoused his version of faith-based accounting; though he could not provide a single, solid reason to explain why the U.S. should adopt IFRS, he has seen the light and has become a true believer. In contrast, reason-based accounting permits recitation of a vast litany of blasphemies against IFRS to make one a serious, if not committed, agnostic. Today, I write of one of these latest abominations: the latest revision to IFRS 3 on the accounting for business combinations.

Goodwill and NCI: IASB Fakes Right and Goes Left

Perhaps the most significant development in the accounting for business combinations is that FAS 141(R) now requires the same basis of measurement for assets acquired and liabilities assumed, regardless of the percentage of a company acquired (so long as control is achieved). Therefore, if control is attained without purchasing 100% of the existing equity interests in the acquiree, non-controlling interests (NCI) must be measured at full fair value.

As you may be aware from reading my post "What Good Comes from Goodwill Accounting?", I am not a big fan of recognizing 'goodwill' under any circumstance, so I will grant that the justification for the FASB's approach is not airtight. Nevertheless, it was common knowledge that the FASB was given to understand that, by sticking its neck out to make these controversial changes to FAS 141(R), the IASB would follow suit.

Instead, the IASB reneged on its promise in the worst way imaginable: they voted to allow entities a free choice between the partial and full fair value alternatives to goodwill and NCI measurement. What's more, issuers can make their choice on a transaction-by-transaction basis -- kind of like going to church one week and synagogue the next. Not even the most devoted acolyte can spin this any other way except as a significant step backwards from establishing the IASB as a credible agent of quality financial reporting and investor protection.

And, it's not just me who is outraged. Read the strongly-worded dissents* of Mary Barth and John Smith, two of the three Americans on the IASB. As to the third American, Jim Leisenring, I guess I shouldn't be surprised that he capitulated to the majority. Leisenring was the most prominent voice in support of FAS 133 (on hedge accounting) when he was on the FASB; a standard whose middle name is inconsistency. Be that as it may, one can only imagine where the IASB will take the interests of U.S. investors when our membership, and hence our influence, on IFRS inevitably wanes.

Mind These GAAPs, Too

If the unprincipled and unconstrained choice of accounting treatments for goodwill and NCI aren't enough for you to abandon any faith in a high-quality convergence, consider two more of the numerous departures from U.S. GAAP; these may be even worse.

First, the devilish game of managing the timing of contingent liabilities still thrives in IFRS. FAS 141(R) now requires that any non-contractual, contingent liability assumed in a business combination must be recognized at fair value, if the probability of occurrence is more likely than not. IFRS allows any contingent liability to be recognized, regardless of likelihood, if it can be reliably measured.

As I discussed in a previous post on IASB machinations of contingent liability accounting, the ubiquitous criterion of "reliable measurement" is one of those areas of "judgment" in IFRS that help management make their numbers with little chance of being challenged by auditors. Here is how this game will be played in a business combination under IFRS 3(R): if management thinks that goodwill won't be impaired any time soon, they will recognize contingent liabilities to the max. The effect is to create an earnings bank of liability write downs when unlikely events become, as anticipated, resolved without the incurrence of an actual liability. And speaking of inconsistency, IFRS 3(R) provides that all intangible assets are to be recognized, even if their fair values cannot be measured reliably. Where is the "principle" for that one?

Second, FAS 141(R) requires extensive disclosures that are designed to aid analysts in determining the past and future effect of a business combination on earnings and financial position. For example, FAS 141(R) requires the following disclosures:

The amount of revenue and earnings of the acquiree since the date of acquisition. Revenue and earnings of the combined entity for the current period as though the acquisition had been consummated as of the beginning of the period Revenue and earnings of the combined entity for the previous period, as if the acquisition had been consummated as of the beginning of the previous period. Inexplicably, IFRS does not require the third item, above. Therefore, inferences as to earnings trends of the combined entity from historical financial statements are defeated.

The recent activities of the IASB, the high priests of IFRS, confirm that they are most definitely not the august body to which the future of U.S. financial accounting standards should be entrusted. To those who persist in practicing faith-based accounting, put IFRS's accounting for business combinations in your pipe and smoke it.

--------------------------

*Unlike statements of the FASB, IFRS publications are not freely available. Just thought you might want to know why I didn't provide a link.

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

IFRS 3 on Business Combinations

Contents paragraphs Introduction IN1–IN16 International Financial Reporting Standard 3 Business Combinations Objective 1 Scope 2–13 Identifying a business combination 4–9 Business combinations involving entities under common control 10–13 Method of accounting 14–15 Application of the purchase method 16–65 Identifying the acquirer 17–23 Cost of a business combination 24–35 Adjustments to the cost of a business combination contingent on future events 32–35 Allocating the cost of a business combination to the assets acquired and liabilities and contingent liabilities assumed 36–60 Acquiree's identifiable assets and liabilities 41–44 Acquiree's intangible assets 45–46 Acquiree's contingent liabilities 47–50 Goodwill 51–55 Excess of acquirer's interest in the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost 56–57 Business combination achieved in stages 58–60 Initial accounting determined provisionally 61–65 Adjustments after the initial accounting is complete 63–64 Recognition of deferred tax assets after the initial accounting is complete 65 Disclosure 66–77 Transitional provisions and Effective date 78–85 Previously recognised goodwill 79–80 Previously recognised negative goodwill 81 Previously recognised intangible assets 82 Equity accounted investments 83–84 Limited retrospective application 85 Withdrawal of Other Pronouncements 86–87 Appendices A Defined terms B Application supplement C Amendments to other IFRSs Approval of IFRS 3 by the Board Basis for Conclusions Dissenting opinions on IFRS 3 Illustrative Examples [Extracted from IFRS 3, Business Combinations. © IASC Foundation.]

Update on the AACSB's Bridge Program for Wannabe Accounting Professors
I'm sure glad the American Medical Association does not have a bridging program where accounting PhDs can become medical doctors by taking four courses in medicine.

Students who get doctorates in fields other than accounting can typically get a doctoral degree in less than 9.5 years of full-time college. For example, an economics PhD can realistically spend only 7.5 years in college. He or she can then enter a bridge program to become a business, finance, or even an accounting professor under the AACSB's new Bridge Program, but that program may take two or more years part time. There just does not appear to be a short track into accounting tenure track positions. But the added years may be worth it since accounting faculty salaries are extremely high relative to most other academic disciplines. The high salaries, in part, are do to the enormous shortage of accounting doctoral graduates relative to the number of tenure-track openings in major colleges and universities --- http://www.trinity.edu/rjensen/Theory01.htm#DoctoralPrograms

Only four United States Universities currently participate in the AACSB's Bridge program and one European business school whose doctoral programs I have doubts about because of truly absurd faculty-to-student ratios in the doctoral program.

The AACSB's domestic alternatives are as follows http://snipurl.com/aacsbbridge  
Also see http://snipurl.com/aacsbbridge2

• The University of Florida (USA)

• Tulane University (USA)

• Virginia Polytechnic Institute and State University (USA).

• University of Toledo

When I mentioned the Bridge Program last year on the AECM, Virginia Tech responded by saying they were participating but not for accounting bridges.

The University of Toledo does not offer accounting bridges --- http://www.utoledo.edu/business/aacsbbridge/curriculum.html

Tulane only lists one full professor of accounting in my Hasselback Directory such that I doubt that Tulane is a major player in an accounting Bridge Program (Tulane may be more viable in management, marketing, and finance).

The University of Florida does apparently have an accounting bridge --- http://www.cba.ufl.edu/academics/pdbp/
But this strangely does not appear to be affiliated with the well known Fisher School of Accountancy at the University of Florida.

From what I can tell, Florida is bridging with only four courses. Can four courses alone turn an economics or history professor into an accounting professor?
The Bridge Program says yes! I think the Bridge Program has little to do with it, although a person's prior background such as years of professional work as a CPA may make all the difference in the world along with the type of doctoral degree earned outside accounting.

June 20 message from Saeed Roohani [sroohani@COX.NET]

AACSB Announces May 2008 Bridge Program Graduates, there are many AACSB certified PQ accounting faculty for hire, see

visit AACSB's online database

 Saeed Roohani
Bryant University

June 20, 2008 reply from Bob Jensen

There is a surprisingly high proportion of the 78 candidates who want to teach accounting and auditing given than most of the bridge programs like Virginia Tech opted out of teaching accounting but do bridge business and finance studies. However, 20 bridged candidates who want to teach accounting and auditing will not make a big dent in the market where the number of accounting faculty openings exceeds the new doctoral graduate supply (less than 100 graduates) by over 1,000 openings.

The big question now is whether those bridged candidates can get tenure track positions and make tenure with sufficient research publications in accounting. The leading schools willingly hire adjunct, non-tenure-track, accounting instructors, but they’re pretty snooty when it comes to tenure tracks.

In my opinion the bridge program is absurd. Can four-courses in a typical bridge program is tantamount to a “90-day Wonder Program” for college graduates to become military officers --- http://en.wiktionary.org/wiki/90-day_wonder

There were great military officers that emerged from the 90-Day Wonder officers' candidate programs. There will also be great accounting, finance, and business professors that emerge from the AACSB bridging program. However, the programs do not deserve much of the credit, since the criteria for success are the credentials and personal qualities of the persons who entered the program. In accounting there's almost no chance of success unless the candidate was a good accountant before entering the bridge program. There's just too much too accounting that cannot be covered in less than about three years of full-time study in accountancy modules alone. In most states it takes five years of college as an accounting major just to sit for the CPA examination.

I'm sure glad the American Medical Association does not have a bridging program where accounting PhDs can become medical doctors.

Bob Jensen

June 20, 2008 reply from David Albrecht [albrecht@PROFALBRECHT.COM]

I still do not understand why a practitioner with no experience in teaching (and no real training, despite what the AACSB says), is more qualified to be a teaching faculty member than a long-term professor that is no longer AQ.

The cases I've seen have been that a practitioner coming in to teach a college classroom bombs much of the time (at least they bomb in the eyes of the students).

The rationale is that PQ faculty will be better teachers than non-AQ doctoral faculty. I simply don't see how this must be so. Becoming a good teacher takes experience in academe and training. Most doctorally-trained non-AQ faculty at least have had years of academic experience (and admittedly no training), and some are great teachers.

I think that the B-school quest for credibility is like the emperor with no clothes on.

David Albrecht

June 20, 2008 reply from Amy Dunbar [Amy.Dunbar@BUSINESS.UCONN.EDU]

There are always exceptions, and at UConn we have at least two of them. One of our auditing instructors is a retired PwC partner, and the BAP teaching award went to him. As for being a great colleague, we couldn’t be luckier! He makes great comments in our research workshops. One of our tax instructors is also a retired PwC partner, and he keeps us on our toes when it comes to new tax legislation and WSJ articles. His sense of humor is great, and he handles the tax challenge team for our department, as well as other student activities. Maybe the difference is that we bring the retired partners on as full-time instructors, and they are part of the team. I don’t know our part-time adjuncts so maybe the story is different there.

Amy Dunbar

UConn

June 20, 2008 reply from Anders, Susan [SANDERS@SBU.EDU]

We owe it to our students to be teaching them current knowledge—especially in an applied field like accounting. With AQ faculty, the assumption is that we will stay current through our research activities. Staying current just from reading a textbook is not acceptable. However, for my school, the AACSB is also expecting some “professional” activities from AQ faculty, which makes sense to me. The AQ faculty in my accounting dept. are engaging in professional activities anyway (for example, Volunteer Income Tax Assistance and Students in Free Enterprise—which are also service activities), in addition to publishing.

Our PQ faculty are also expected to stay current—with a reverse emphasis from the AQs. Professional activities have more emphasis, but we need some publication activity as well.

Faculty can be out of date and lousy teachers whether they are AQ or PQ. PhD programs prepare us to engage in research, not necessarily to teach. PQ faculty can learn to teach the same way that we AQs do—trial and error.

I have noticed major shifts in the “culture” of students every three or four years, so even if I was a good teacher four years ago, I have to modify my approaches to fit the students in front of me today, in addition to staying up with changes in technology, tax law, and accounting pronouncements.

Hopefully, any new faculty that we hire at my school are committed to being good teachers, whether they are AQ or PQ.

My colleagues at St. Bonaventure invested both their time and confidence in me to help me become both a good teacher and an active publisher. [Thank you Carol Fischer!!!] As members of academia, we should be reaching out to new (and old) colleagues to provide mentoring in both teaching and research.

Thank you.

Susan B. Anders, Ph.D., CPA
Professor of Accounting
St. Bonaventure University
School of Business
St. Bonaventure, NY 14778
Office: (716) 375-2063
Cell: (716) 378-7765
Fax: (716) 375-2191
e-mail: sanders@sbu.edu 

June 20, 2008 reply from Dennis Beresford [dberesfo@TERRY.UGA.EDU]

To pile on just a bit, I'd like to think that my now eleven years at the University of Georgia have been reasonably successful. It is certainly true that I received virtually no training to teach and had to figure it out for myself over the years. In fact, I shudder to think how hard I worked my first MAcc classes as compared to what I now consider a challenging but reasonable workload.

Being able to share experiences from both the auditing world and standard setting helps bring the issues to life for the students, I believe. In thinking back many years, one of the best accounting classes I had was taught by the partner in charge of the tax department of Price Waterhouse in Los Angeles. Rather than the extremely dry Internal Revenue Code that passed for a textbook at that time, he could tell us about actual applications of the things we were learning. It probably helped that he was also the person who handed out the Academy Awards and was very personable.

My challenge is to avoid using too much class time to tell war stories. Getting the right balance between the theoretical and the practical is important for me, but I assume it is just as important for all of you PhD trained instructors. And I also think it's important to not rely on experiences that are too old as the world changes and some of those observations about "how the real world works" (based on, for example, two years in public accounting twenty years ago) are simply incorrect today. On the other hand, having the opportunity to serve on three large corporate boards and keeping involved with a number of professional activities on a national basis allows me to share with the students many of the insights that are behind the news in the Wall Street Journal and makes the accounting standards and other things the students are learning more relevant.

This past semester one of my students complained because he thought we had been spending too much time on fair value accounting and international accounting convergence. He thought those topics had little to do with what he had learned in other classes and probably wouldn't be on the CPA exam. Fortunately, most of the other students understood the benefit of getting in on the ground floor of some of the most important developments in accounting in history.

My experiences are very unique and I give thanks every day that I've had these opportunities. But I sincerely believe that there are many other retired CPA firm partners and CFOs who would do a great job in the classroom and bring other benefits to an accounting program. I've even had some of my colleagues say that they appreciate it when I attend a research workshop as my comments are both relevant and practical (at least a few of them!).

By the way, my academic credentials ended with a B.S.

Denny Beresford

June 20, 2008 reply from Bob Jensen

Hi Denny,

Your reply is wonderfully stated.

I might add that NASBA’s problems with building more and more IFRS into the CPA examination are not trivial. For nearly a century, the CPA examination has been based upon a lot of bright lines in U.S. GAAP. Bright lines are especially preferred because it’s so much easier to distinguish correct answers from incorrect answers. Much of the infrastructure of our accounting education programs in terms of curricula and teachers is rooted in US GAAP and especially the CPA examination.

Accounting education programs in the U.S. will have a very difficult time changing infrastructure and most certainly do so at different rates of change. Probably the best way to speed things up will be a quick introduction of IFRS on the CPA examination. But there are tremendous problems in making this transition. For example, something as fundamental as a “derivative financial instrument” that’s become part and parcel to risk management is defined differently in IAS 39 versus FAS 133. If the underlying definitions differ, think of the problems that will arise in changing curricula, textbooks, teaching notes, reading materials, and teachers themselves!

Another problem will be to change the content of the examination in terms of bright lines. Wrong versus right answers will have to become more conceptualized since IFRS has so few bright lines. Perhaps this is a good thing that will penalize the best memorizers. But it will be harder to design exam questions and most certainly harder to grade them when there are fewer definitive answers to accounting for transactions. A principles-based CPA examination will probably be chaotic in the transitioning period.

What a great feeling to be retired from teaching at this stage of turmoil. So why am I spending most of my time doing research in IAS 39 versus FAS 133?

Dahh!

Bob Jensen

June 20, 2008 reply from Jagdish Gangolly [gangolly@CSC.ALBANY.EDU]

Teaching requires tremendous dedication and discipline. On the other hand, a good teacher is one who makes the students think.

My own experience is that doctorally qualified faculty, because of their reward structure, very often do not show teaching the same dedication they show for "research", whatever it means in the accounting academia.

My experience is also that those who have never experienced the professional world are often lacking, in spite of their exalted status as PhDs, crucial skills is public speaking, leadership, problem definition and solving, organisation skills and also often reduce the rich professional landscape to a set of rote-learning exercises by regurgitating what is in the books.

They also, often, do not give students sufficient time in the class to think, and usually act like machines that spew information. This of course precludes the students asking penetrating questions for which the practice-challenged PhD faculty may not have answers. The losers are the poor students.

On the other hand, my experience, as a faculty member and recently as department chair, has been that the PQ faculty are more often than not good in class, very organised, very dedicated, bring the richness of the profession in the classroom, make the students think, make the students write and take time to read them and help the students,

It is quite possible that our experience at Albany is accidental, and our ability to get outstanding PQ faculty serendipitous.

Our PQ faculty are usually partners at small/medium/regional accounting firms, CFOs and senior managers at large corporations, partners at law firms. Most of them are CPAs, many are JDs and LLMs.

I want to end with three famous quotes from Rabindranath Tagore, a literature Nobel laureate and a poet, on education. He refers to children, but are as applicable to adult education:

1. "The highest education is that which does not merely give us information but makes our life in harmony with all existence. But we find that this education of sympathy is not only systematically ignored in schools, but it is severely repressed. From our very childhood habits are formed and knowledge is imparted in such a manner that our life is weaned away from nature and our mind and the world are set in opposition from the beginning of our days. Thus the greatest of educations for which we came prepared is neglected, and we are made to lose our world to find a bagful of information instead. We rob the child of his earth to teach him geography, of language to teach him grammar. His hunger is for the Epic, but he is supplied with chronicles of facts and dates...Child-nature protests against such calamity with all its power of suffering, subdued at last into silence by punishment.

2. The child learns so easily because he has a natural gift, but adults, because they are tyrants, ignore natural gifts and say that children must learn through the same process that they learned by. We insist upon forced mental feeding and our lessons become a form of torture. This is one of man's most cruel and wasteful mistakes.

3. A mind all logic is like a knife all blade. It makes the hand bleed that uses it.

Jagdish

June 20, 2008 reply from Bob Jensen

Hi Jagdish,

On the battlefield, probably the most important soldiers are the sergeants who lead in the actual face-to-face operations.

I have the same feelings about full-time adjuncts and PQ faculty and view them somewhat as our sergeants in the field. Of course there are some good officers in the field as well.

But sergeants aren't admitted to the officer's clubs and cannot rise to the highest-paying ranks. Is this the same for your adjuncts and PQ faculty?

When performance rewards, endowed chairs, travel budgets, and leaves of absence are doled out, it's most likely the research faculty who get the