Paul Munter

The impact of uncertainty and monitoring by the board of directors on incentive system design

Executive compensation and incentive packages have received a great deal of attention recently in the professional business literature as well as from the accounting standard setters. Examines the design of compensation systems. Suggests that environmental uncertainty and monitoring by the board of directors are both negatively related to the use of outcomebased compensation systems and that additionally, since this topic has both management accounting as well as financial accounting implications, it may provide a more comprehensive framework for investigating control system designs.

SEC sharply criticizes “earnings management” accounting

Chairman Levitt has attacked many of the current practices to “manage” earnings.

Ethical Perceptions of CPAs

There has been an increasing concern about ethical behaviour in the accounting profession. Examines CPAs′ perceptions about the ethical behaviour which currently exists in the accounting profession. Results indicate that there is a polarity which exists among CPAs. Many believe that accountants, generally, do act in an ethical manner. Importantly, however, many others believe that unethical behaviour has increased in recent years. Further, there is a growing belief among some practitioners that the actions of partners of CPA firms may be condoning that unethical behaviour.

Exploring the garbage can: A study of information flows

The Garbage Can Model (GCM) has been used to study behavioral aspects of organizations and has been found to be a useful paradigm. In this study, the GCM has been used to study the behavioral implications of informal information systems of business entities. Currently little is known about this issue. As such, hypotheses are developed based upon the empirical findings which may provide a foundation for subsequent research. These hypotheses are: (1) problem senders and problem solvers are paramount in organizational problem identification, (2) both General and Problem type communications are correlated with and might result in Solution identification, (3) both General and Solution related communications are correlated with and might result in Problem identification, and (4) role stress is an important factor in the Problem-General-Solution communication linkage.

FASB Revises Definition of a Business

When the Financial Accounting Standards Board (FASB) issued FAS 141R in 2007, it redefined what constitutes a business for financial reporting purposes. In doing so, the FASB decided that the previous definition of a business was too narrow. Accordingly, “the FASB decided to expand the definition of a business combination to include all transactions or other events in which an entity obtains control of a business.”

FAS 125 Update

The FASB has recently updated the rules in accounting for transfers of financial assets. The author reviews the previous standard and explains whats new in the latest update—and how it will affect you.

Using derivatives in treasury management

Companies must coordinate their accounting and treasury functions to get the most out of derivatives, warns the author. He discusses treasury responsibilities in derivative activities, and presents detailed guidelines for decision making.

Discontinued operations: Old standards, new problems

Lately, there have been increasing concerns about how companies reported on discontinued operations.

Accounting for derivatives—the FASB begins to move from disclosures to recognition and measurement

In October 1994, the Financial Accounting Standards Board (FASB) issued SFAS No. 119, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments, as a part of its ongoing financial instruments deliberations. SFAS No. 119 draws on the disclosure requirements in SFAS No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, and SFAS No. 107, Disclosures about Fair Value of Financial Instrumenta SFAS Nos. 105 and 107 established disclosure requirements for financial instruments.1 SFAS No. 119 expands these requirements to apply to derivative financial instruments as well. The FASB is now in the process of developing recognition and measurement criteria for derivatives. One scenario would call for the recognition and measurement provisions to be based on the disclosure requirements found in SFAS No. 119. Thus, in this article, we first examine the provisions of SFAS No. 119 and then discuss the accounting provisions currently being debated by the FASB.

SEC form 10‐K checklist—income statement, cash flows, footnotes, and other miscellaneous topics—part 2

The following checklist is a continuation of the 1994 SEC Form 10-K Checklist that was presented in the Summer 1994 issue of The Journal of Corporate Accounting and Finance. It includes SEC rules for the income statement, additional income and expense disclosures, statement of cash flows, accounting changes presentation and disclosure, other financial statement disclosures, financial statement schedules, and other miscellaneous special topics in the Form 10-K. Although it generally covers only the codified SEC rules, certain common reporting problems cited recently by the SEC staff are also addressed. It does not include GAAP or GAAS rules except as they are codified in SEC rules or have been identified in Staff Accounting Bulletins or Financial Reporting Releases. Therefore, this checklist should be used in conjunction with a general GAAP checklist. Also, it does not cover specialized industries, foreign company requirements, or unusual or unique accounting and reporting issues. Other reference materials should be consulted for such items. It does include certain common reporting problems cited by SEC staff members at various recent conferences. In this regard, only problems that are likely to be applicable to the average company with reasonable frequency are included.