Analysts' Forecast Accuracy in Germany: The Effect of Different Accounting Principles and Changes of Accounting Principles

This paper assesses the influence of an adoption of IAS/IFRS or US GAAP on the financial analysts’ forecast accuracy in a homogenous institutional framework. Our findings suggest that the forecast accuracy is higher for estimates based on IFRS or US GAAP data than for forecasts based on German GAAP data.Moreover, in the year of switching from German GAAP to US GAAP the forecast accuracy is lower than in other years. The paper contributes to prior research by providing evidence about the usefulness of international accounting data and about the adoption effects of a change to such accounting principles.

A Simple Accounting-based Valuation Model for the Debt Tax Shield

This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that accounts for the tax benefit that comes from borrowing to raise cash for the operations. The model assumes that the firm maintains a deterministic financial leverage ratio, which tends to converge quickly to typical steady-state levels over time. From a practical point of view, this characteristic is of particular help, because it allows a continuing value calculation at the end of a short forecast period.

Decision-usefulness of ideal cost- and ideal value accounting for valuation and stewardship

This paper contrasts the decision-usefulness of prototype accounting regimes based on perfect accounting for value, i.e. ideal value accounting (IVA), and perfect matching of cost, i.e. ideal cost accounting (ICA). The regimes are analyzed in the context of a firm with overlapping capacity investments where projects earn excess returns and residual income is utilized as performance indicator. Provided that IVA and ICA systematically differ based on the criterion of unconditional conservatism, we assess their respective decision-usefulness for different valuation- and stewardship-scenarios. Assuming that addressees solely observe current accounting data of the firm, ICA provides information which is useful for valuation and stewardship without reservation whereas IVA entails problems under specific assumptions.

Accounting for baseline differences and measurement error in the analysis of change over time

If change over time is compared in several groups, it is important to take into account baseline values so that the comparison is carried out under the same preconditions. As the observed baseline measurements are distorted by measurement error, it may not be sufficient to include them as covariate. By fitting a longitudinal mixed-effects model to all data including the baseline observations and subsequently calculating the expected change conditional on the underlying baseline value, a solution to this problem has been provided recently so that groups with the same baseline characteristics can be compared. In this article, we present an extended approach where a broader set of models can be used. Specifically, it is possible to include any desired set of interactions between the time variable and the other covariates, and also, time-dependent covariates can be included. Additionally, we extend the method to adjust for baseline measurement error of other time-varying covariates. We apply the methodology to data from the Swiss HIV Cohort Study to address the question if a joint infection with HIV-1 and hepatitis C virus leads to a slower increase of CD4 lymphocyte counts over time after the start of antiretroviral therapy.

Estimating Diagnostic Test Accuracies for Brachyspira hyodysenteriae Accounting for the Complexities of Population Structure in Food Animals

For swine dysentery, which is caused by Brachyspira hyodysenteriae infection and is an economically important disease in intensive pig production systems worldwide, a perfect or error-free diagnostic test ("gold standard") is not available. In the absence of a gold standard, Bayesian latent class modelling is a well-established methodology for robust diagnostic test evaluation. In contrast to risk factor studies in food animals, where adjustment for within group correlations is both usual and required for good statistical practice, diagnostic test evaluation studies rarely take such clustering aspects into account, which can result in misleading results. The aim of the present study was to estimate test accuracies of a PCR originally designed for use as a confirmatory test, displaying a high diagnostic specificity, and cultural examination for B. hyodysenteriae. This estimation was conducted based on results of 239 samples from 103 herds originating from routine diagnostic sampling. Using Bayesian latent class modelling comprising of a hierarchical beta-binomial approach (which allowed prevalence across individual herds to vary as herd level random effect), robust estimates for the sensitivities of PCR and culture, as well as for the specificity of PCR, were obtained. The estimated diagnostic sensitivity of PCR (95% CI) and culture were 73.2% (62.3; 82.9) and 88.6% (74.9; 99.3), respectively. The estimated specificity of the PCR was 96.2% (90.9; 99.8). For test evaluation studies, a Bayesian latent class approach is well suited for addressing the considerable complexities of population structure in food animals.

The International Financial Reporting Standards and Their Implementation into the US Accounting System

This paper examines the differences between the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). The areas closely examined are the differences inrevenue recognition and reporting of intangibles. By investigating the differences in the two sets of standards I put into context the changes that would be necessary for domestic companies adopting the IFRS. The differences between these two standards are important because the implementation of IFRS into the U.S. is a current issue for domestic companies. It is important to note how the new standards will affect different companies in different ways. Depending on the size and industry, some companies will have a harder time transitioning to the new standards. However, once these companies make the transition to IFRS they will have better recognition and reporting of revenues and intangibles.

Debate over Fair Value Accounting: Should we allow Politics to take an active role in setting accounting standards or should we trust that the SEC knows best?

In light of the recent economic downfall, there has been significant media coverage on the topic of fair value accounting. There are many critics of the accounting rule, who place blame on it for the destruction of billions of dollars in capital between financial institutions. Other commentators, however, see the rule as necessary and applaud its ability to bring the turmoil in the economy into the spotlight promptly so that it could be addressed effectively. This paper will begin by conducting a study of fair-value accounting from its inception in previous standards and then follow it through to Statement No. 157. I will then discuss the SEC’s most recent study of FAS157 and their decision as a result of the study.

Accounting for Athletics: A Balanced Scorecard Approach

The Balanced Scorecard is a managerial accounting system designed for internal use in order to align four different facets of a business with its overall vision and strategy. It emphasizes that an organization should not be judged on financial performance alone, but also on a variety of non-financial metrics. Using the Balanced Scorecard, the Athletic Department at the University of Connecticut has been analyzed as to which metrics are the most important in terms of fulfilling their mission statement.

Consumption-based accounting of U.S. CO2 emissions from 1990 to 2010

To tackle global climate change, it is desirable to reduce CO2 emissions associated with household consumption in particular in developed countries, which tend to have much higher per capita household carbon footprints than less developed countries. Our results show that carbon intensity of different consumption categories in the U.S. varies significantly. The carbon footprint tends to increase with increasing income but at a decreasing rate due to additional income being spent on less carbon intensive consumption items. This general tendency is frequently compensated by higher frequency of international trips and higher housing related carbon emissions (larger houses and more space for consumption items). Our results also show that more than 30% of CO2 emissions associated with household consumption in the U.S. occur outside of the U.S. Given these facts, the design of carbon mitigation policies should take changing household consumption patterns and international trade into account.

Activity based costing, time-driven activity based costing and lean accounting: differences among three accounting systems' approach to manufacturing

Choosing an appropriate accounting system for manufacturing has always been a challenge for managers. In this article we try to compare three accounting systems designed since 1980 to address problems of traditional accounting system. In the first place we are going to present a short overview on background and definition of three accounting systems: Activity Based costing, Time-Driven Activity Based Costing and Lean Accounting. Comparisons are made based on the three basic roles of information generated by accounting systems: financial reporting, decision making, and operational control and improvement. The analysis in this paper reveals how decisions are made over the value stream in the companies using Lean Accounting while decisions under the ABC Accounting system are taken at individual product level, and finally we will show how TD-ABC covers both product and process levels for decision making. In addition, this paper shows the importance of nonfinancial measures for operational control and improvement under the Lean Accounting and TD-ABC methods whereas ABC relies mostly on financial measures in this context.

A bivariate return period based on copulas for hydrologic dam design: accounting for reservoir routing in risk estimation

A multivariate analysis on flood variables is needed to design some hydraulic structures like dams, as the complexity of the routing process in a reservoir requires a representation of the full hydrograph. In this work, a bivariate copula model was used to obtain the bivariate joint distribution of flood peak and volume, in order to know the probability of occurrence of a given inflow hydrograph. However, the risk of dam overtopping is given by the maximum water elevation reached during the routing process, which depends on the hydrograph variables, the reservoir volume and the spillway crest length. Consequently, an additional bivariate return period, the so-called routed return period, was defined in terms of risk of dam overtopping based on this maximum water elevation obtained after routing the inflow hydrographs. The theoretical return periods, which give the probability of occurrence of a hydrograph prior to accounting for the reservoir routing, were compared with the routed return period, as in both cases hydrographs with the same probability will draw a curve in the peak-volume space. The procedure was applied to the case study of the Santillana reservoir in Spain. Different reservoir volumes and spillway lengths were considered to investigate the influence of the dam and reservoir characteristics on the results. The methodology improves the estimation of the Design Flood Hydrograph and can be applied to assess the risk of dam overtopping