Jerry G. Kreuze

The New Scarlet Letter: Student Perceptions of the Accounting Profession After Enron

Recent scandals have tarnished the integrity of the accounting profession, marking it with a modern version of the scarlet letter A, which represented disgrace in Nathaniel Hawthornes The Scarlet Letter. In this study, the authors surveyed college business students on their perceptions of the accounting profession and examined how it can overcome its fall from grace. The encouraging news for business educators is that students are not rethinking their college major or career choice as a result of the corporate accounting problems.

Accounting Faculty Profiles: Demographics and Perceptions of Academia

Abstract In this study, we compared profiles of doctoral degree holders in accounting from the 1970, 1980, and 1990 graduating classes to determine differences among graduating classes. Our results indicate that most accounting doctoral graduates pursued an academic career primarily for lifestyle preferences and initially joined the faculty of an academic institution offering a masters and/or doctoral degree. Though satisfaction levels were high, most respondents encountered moderate to much stress in their current positions and believed that there are fewer opportunities in higher education now than when they received their doctoral degrees. The more recent doctoral graduates were more likely to have nonbusiness undergraduate majors, were older when they received their degrees, and took longer to finish the doctoral program. Moreover, recent graduates had fewer professional certifications, perceived greater stress levels in academia, and placed greater emphasis on publication and research.

Achieving Performance Excellence: Training the Trainer

During the last decade many organizations have reduced the number of middle level managers and shifted the emphasis in managerial work from the traditional functions of motivating and controlling to the less familiar roles of coach, facilitator, and trainer. What has not been recognized is that not only are mangers unfamiliar with these new roles, they are often unprepared for them. Little in their educational background or work experience has prepared them for the role of facilitator, coach, or trainer. This paper uses the Experiential Learning Model, which provides an overview of how people learn, as a basis for identifying common mistakes managers make in teaching new tasks, and to suggest ways for managers to improve their effectiveness as trainers.

An analysis of Lehman Brothers bankruptcy and Repo 105 transactions

Purpose - The purpose of this paper is to investigate the bankruptcy of Lehman Brothers, with particular focus on its use of Repo 105 transactions. Design/methodology/approach - The use of the Lehmans bankruptcy report produced in part by Anton R. Valukas was used as a basis to explain how Lehman maintained acceptable leverage ratios through the use of Repo 105 transactions to paint a better picture of its financial position than actually existed. Findings - The study concludes that Lehmans accounting method choice disguised its real problems, perhaps long enough for bankruptcy to become the only option. Practical implications - Lehmans bankruptcy becomes part of a growing history of business failures where accounting principles have become the focus. The failure of Lehman reminds us that financial reporting must remain transparent, allowing users to make informed decisions with confidence. Originality/value - This bankruptcy provides a painful reminder that financial reporting must allow users to differentiate among investment alternatives, based on the relative, factual financial position of the investment. The credibility of our reporting model is at stake.

Corporate Pension Plans: How Consistent are the Assumptions in Determining Pension Funding Status?

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

Student ratings of accounting instructors a search for important determinants

Abstract Student ratings of accounting instructors are commonly used in determining promotion, tenure, salary, and merit increases. This paper reports the results of a study conducted to determine which attributes (factors) of teaching behavior are especially important in explaining the overall rating of accounting instructors. Two factors, teacher presentation and grading system, had a significant influence on, and were highly correlated to, the overall instructor evaluation. Instructors interested in improving student satisfaction should, therefore, ascribe higher priority to those two factors of teaching behavior. As a result, student satisfaction of the course and the instructor should increase.

The Relationship of Net Income to Comprehensive Income: An Analysis of Fortune 500 Companies

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

Accounting for Nonpension Postretirement Benefits: Analysis of Lobbying Activities

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

Corporate social responsibility and firm financial performance: Comparison analyses across industries and CSR categories

Purpose - Despite the intensive research on corporate social responsibility (CSR) and firm financial performance, little is known about how the linkage between CSR and firm financial performance is heterogeneous across industries and how the performance implications are differentiated among specific categories of CSR activities. The purpose of this paper is to explore how the association between a firm’s engagement in CSR and firm financial performance is heterogeneous across industries and CSR categories. Design/methodology/approach - Using a sample of 17,083 firm-year observations representing 1,877 firms from the largest 3,000 US companies during years 1991 and 2011, the authors compare the association between CSR and firm financial performance across ten industry sectors defined by Global Industry Classification Standard and across the four CSR categories classified by Mandl and Dorr (2007). Findings - The authors find that the association between the overall CSR activities and firm performance is heterogeneous across industries. CSR has significant positive implications for firms from most, but not all, industries. Comparing the performance implication of CSR practices targeting different stakeholder groups, the empirical results indicate that different types of CSR have different influences on financial performance of firms from different industry sectors. Research limitations/implications - This study provides new angles for managers in maximizing firm performance through CSR activities and suggests an important and interesting direction for researchers who engage in CSR research. Due to its heterogeneous nature, the CSR-performance relationship needs to be examined more specifically – across industries and different CSR categories. Findings from studies incorporating both company industrial sector and CSR categories would provide more meaningful and practical implications for managers. Practical implications - This study provides important managerial implications. First, to maximize firm performance through CSR activities, managers must interpret the linkage between CSR and firm financial performance from the perspective of a specific industrial sector and acknowledge the importance of CSR practices across different CSR categories. Second, the findings suggest that CSR practices aiming at different stakeholder groups generate different financial returns in different industries. Firms engage in CSR to satisfy different stakeholder groups. When budgets are tight, managers may give higher priority to the CSR practices that have stronger effects on firm financial performance. Originality/value - This study advances our understanding of the CSR-financial performance relationship by exploring its heterogeneous nature across industry sectors and across specific categories. To obtain the biggest gain from CSR spending, managers must have a good understanding how a specific CSR category can contribute to the financial performance of their particular company in their particular industry.

Stock Buybacks and Their Association with Stock Options Exercised in the IT Industry

One of the most complex and controversial issues confronting the Financial Accounting Standards Board (FASB) over the last several years has been the accounting and financial reporting of stock options. In December 2004, the FASB issued Statement 123R, Share-Based Payment, in the hope that the long process of revising the accounting and financial reporting for stock options will be put to rest. FASB Statement 123R requires the fair-value-based method of accounting for share-based payments. In order to offset the dilutive effects of generous stock option compensation packages for employees, companies are seemingly participating in stock repurchase plans. In the past, stock buyback programs were viewed as a means of distributing excess cash flow to investors; however, it appears now that many companies are financing stock repurchases through the issuance of debt, which can significantly impact the financial flexibility of a company. So, why do companies engage in this behavior? One possible reason for stock buybacks is to reduce the dilutive effect of stock option plans. Companies have, however, disputed that there is a direct relationship between exercised stock options and stock buyback transactions. Nevertheless, several articles and studies have found that there is a relationship and the FASB seems to believe that there is an association between stock buybacks and stock options, as Statement 123R requires that companies disclose the relationship between stock buybacks and stock payment programs. Using a sample of technology firms, we find evidence of an association between exercised stock options and repurchase of stock.