Sheldon A. Langsam

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.

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.

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.

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.

Analysis of Simplification of Accounting Initiative for Inventory and Update of Other Simplification Proposals

This article examines Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory. Through the accounting simplification initiative, the Financial Accounting Standards Board is reviewing areas of U.S. generally accepted accounting principles (GAAP) that can be simplified while still maintaining high-quality accounting standards. Under this new standard, companies will be required to value inventory using the lower of cost or net realizable value. Companies using the last-in, first-out (LIFO) and retail inventory methods will be scoped out of applying the new standard.

M&A compensation issues: Can you keep everybody happy?

Compensation is an important issue in all mergers and acquisitions. But executives and employees worry about different things. How should you handle it?

Auditing to combat revenue recognition fraud

Revenue recognition fraud has been in the news lately. In fact, more than half of all financial reporting fraud involves overstating revenue. The authors review the current literature that applies to revenue recognition fraud and offer some useful audit tools and procedures to prevent it.

CEO Compensation, Performance Variables, and Socially Responsible Investing

Significant investment dollars are now allocated to companies deemed by investors as socially responsible. This socially responsible theme contends that corporations should be held accountable for the totality of their actions and decisions, including CEO compensation levels. This paper investigates whether CEO compensation levels are more associated with traditional performance measures for socially responsible firms than for firms deemed not socially responsible, with the assumption being that social choice firms will be more sensitive to and may attempt to align CEO compensation levels with corporate performance. Rank correlation analysis and regression results using nine performance variables for 270 firms indicated that CEO compensation levels at social choice companies were more highly associated with performance variables than those at nonsocial companies. The study results suggest that social choice companies, in addition to their other corporate good deeds, seem to include CEO compensation levels as a part of their overall corporate decision process.

Accounting for the impairment of long-lived assets: A review and update

Recent marks by SEC Chairman Arthur Levitt and Chief Accountant Lynn Turner have put new attention on certain provisions of SFAS No. 121. In light of the SEC concerns, the authors review and update the issue of asset impairment for readers. The authors also present the results of their review of note disclosures for 48 Fortune 500 firms.