Mary E. Barth

The Relevance of the Value Relevance Literature For Financial Accounting Standard Setting: Another View

Disclosed is a machinery operator protection system and method, which inhibits the use of machinery unless the operator of the machinery is properly secured with a lanyard and/or body harness to the machinery. The disclosed system includes a lanyard connection detector for detecting proper attachment of at least one lanyard to a machinery operator and a lanyard interlock control for controlling a switch to selectively enable activation of the machinery when the lanyard connection detector indicates that the operator is properly attached to the machinery with the lanyard. The disclosed method includes the steps of: detecting when at least one safety lanyard is properly attached to a between a machinery operator and a piece of machinery; and inhibiting operation of the machinery unless proper operator safety lanyard attachment is detected. Optionally, the method may also include providing an audible or visual warning alarm to advise the machinery operator if he or she attempts to use the machinery without proper safety lanyard attachment.

Relative valuation roles of equity book value and net income as a function of financial health

Abstract This study tests predictions that pricing multiples on and incremental explanatory power of equity book value (net income) increase (decrease) as financial health decreases. Tests using a sample of 396 bankrupt firms and tests using a larger, pooled sample both yield inferences consistent with predictions. Findings are robust to inclusion of controls for industry, size, return-on-equity, and volatility of equity returns. Equity book value and net income multiples and incremental explanatory power vary predictably across three illustrative industries, selected based on the likely extent of unrecognized intangible assets.

Brand Values and Capital Market Valuation

Brand value estimates are significantly positively related to prices and returns, incremental to accounting variables. Questionable brand value estimate reliability underlies lack of financial statement recognition for brands. Findings suggest estimates are relevant and sufficiently reliable to be reflected in share prices. Simultaneous equations estimation reveals inferences are unaffected by potential bias resulting from simultaneity between brand value estimates and equity market value. Brand value estimates are positively associated with advertising expense, operating margin, and market share. Yet, brand value estimates provide significant explanatory power for prices incremental to these variables, and to recognized brand assets and analysts earnings forecasts.

Revaluations of fixed assets and future firm performance: Evidence from the UK1

A gravity force driven device and associated methods for the sustained release of a fluid such as a volatile substance into a local environment. The device includes a housing having a lumen and a first open end, at least one porous plug permeable to volatilized substance positioned within the housings first open end and partially occupying the lumen thereby, a reservoir, defined by the lumen and porous plug, and a quantity of the fluid contained within the reservoir. In use, the device is oriented so that the substance contained within the reservoir is in constant fluid communication with the porous plug. The device may further include an inlet port for refilling the device with the substance in fluid communication with the reservoir, and, for home use, may have an ornamental piece associated with (e.g. affixed to) the device. The device may also use an electrochemical gas generating cell to assist the gravity-driven dispersal. In certain embodiments, the device will be associated with, or further include, a heating element for volatilizing the substance. In one embodiment, the device is used to deliver a beneficial agent to the skin of an animal such as a mammal. The invention also includes associated methods for using the device. The delivery devices of the instant invention are rugged and may be mass-produced at a relatively low cost. Volatile substances which can be dispensed include fragrances, perfumes, volatile insecticides, pest repellent fluids, and volatile medicament fluid compounds.

SFAS No. 123 Stock‐Based Compensation Expense and Equity Market Values

This study investigates the relation between share price and stock‐based compensation expense that is disclosed but not recognized under SFAS No. 123, after controlling for net income, equity book value, and expected earnings growth. Our instrumental variables approach controls for the mechanical relation between share price and option values. We find that investors view SFAS No. 123 expense as an expense of the firm, and as sufficiently reliable to be reflected in their valuation assessments. Findings based on annual returns indicate SFAS No. 123 expense reflects on a timely basis changes in investor‐perceived costs associated with stock‐based compensation.

Including Estimates of the Future in Today's Financial Statements

This paper explains why the question is how, not if, todays financial statements should include estimates of the future. Including such estimates is not new, but their use is increasing. This increase results primarily because standard setters believe asset and liability measures that reflect current economic conditions and up-to-date expectations of the future will result in more useful information for making economic decisions, which is the objective of financial reporting. This is why standard setters seem focused on fair value accounting. How estimates of the future are incorporated in financial statements depends on the asset and liability measurement attribute, and on financial reporting definitions of assets and liabilities. The present definitions depend on identifying past transactions or events that give rise to expected inflows or outflows of economic benefits and, for inflows, control over the expected benefits. Thus, not all expected inflows or outflows of economic benefits are recognised. Note disclosures can help users understand recognised estimates, and can provide information about unrecognised estimates. Including more estimates of the future in todays financial statements would result in an income measure that differs from todays income, but arguably provides better information for making economic decisions.

Share repurchases and intangible assets

Abstract Firms with more intangible assets are more likely to repurchase shares and have more positive repurchase announcement returns, as predicted. Because intangibles generally are unrecognized, share repurchases represent a potential cost to an incomprehensive accounting model. Idle cash is positively related to repurchase likelihood and negatively related to announcement returns, as predicted. Contrary to predictions, general information asymmetry is negatively related to repurchase likelihood, but announcement returns are positively related, as predicted. Tests include controls for stock option plans, dividends, and book-to-market ratios, which generally are significant as predicted. Using change variables in the repurchase likelihood tests yields consistent inferences.

International accounting harmonization and global equity markets1

Abstract We show harmonizing domestic GAAP with foreign GAAP can have deleterious effects on security market performance, specifically price informativeness and trading volume. Harmonization effects result from interaction between two forces. Direct informational effects depend on whether harmonization increases or decreases GAAP precision. Expertise acquisition effects depend on benefits and costs to foreign investors of becoming domestic GAAP experts. These countervailing forces can result in harmonization to more (less) precise GAAP increasing (decreasing) or, unexpectedly, decreasing (increasing) price informativeness and trading volume. We also observe this for a cost of capital metric. Thus, harmonization is not necessarily a desirable singular goal.

Valuation‐based accounting research: Implications for financial reporting and opportunities for future research

This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research.

Standard-setting measurement issues and the relevance of research

(2007). Standard-setting measurement issues and the relevance of research. Accounting and Business Research: Vol. 37, Special Issue: International Accounting Policy Forum, pp. 7-15.