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When it comes to buffing results to please Wall Street, a wildly popular move now is to stuff discounts and shipping costs below the gross profits line, says accounting analyst Jack T. Ciesielski. They belong above it. The shuffling of expenses doesn't affect the bottom line--often negative in any event--but it does affect the ones closer to the top of the income statement, lines that Internet investors pay a lot of attention to. The same games are being played with shipping costs. Read more...

The Financial Accounting Standards Board is proposing to change the way a company accounts for the premium - or payment in excess of fair market value - that it pays to acquire another company. The idea is to give analysts and others more information about merger activity, thereby allowing them to make better investment decisions. But as usual, there is more going on than meets the eye, and it may have as much to do with FASB sensitivities as it does with accounting practice.

One of the foundations of American accounting is the Historical Basis approach, under which assets are presented on the balance sheet at their value at the time of acquisition. But in an era marked by the widespread use of complicated financial instruments and risk management strategies that may render yesterday's prices obsolete, some people are asking if historical cost should be replaced by a current-cost system. It could lead to more accurate financial reporting. Or it could lead to chaos.

Take a close look at some audit disasters, and you may agree with the SEC's outgoing chairman, Arthur Levitt: Accounting work and consulting work really shouldn't be under the same roof.

Effective mobilizing and energizing goes well beyond "doing" programs to the "being" or culture of a team, organization, or any group including a family. That culture is a set of shared attitudes and accumulated habits around "the way we do things here."

Auditors face more pressure to find fraud.

An interesting look at the dynamics involved between Financial Accounting Standards Board (FASB), Congress and the SEC, including some historical background on battles, notably the ongoing one concerning expensing stock options.

In a hard hitting article Kane looks at the accounting profession and does not like what he finds. After laying out "an unremitting flood of accounting scams" he "traces a major part of the problem to the flawed ethics of the accounting profession" which he claims "by designing and certifying reporting options that help troubled firms and rouge managers to conceal adverse information from outside stakeholders, the highly concentrated accounting industry manages to insulate from serious sanctions the economic rents it can earn from cleverly abetting deceitful behavior." Wow. This one is definitely worth reading and discussing. [FinanceProfessor.com Annotation]

Conservatism is under attack from certain circles. For example, some (including even the FASB) are now suggesting it may be better to abandon conservatism in order to show more unbiased financial statements. In a surprisingly interesting article (NOTHING personal, but come on, it is about accounting conservatism!) Ross Watts looks at this issue and examines conservatism both from a both an historical/theoretical perspective as well as by reviewing the empirical literature on the subject. [FinanceProfessor.com Annotation]

Wier, Stone, and Hunton look at whether, and if so what type of, graduate education is useful in predicting professional success in accounting. Using a fairly large data set (about 9000 total students), the authors conclude that graduate education does help (and it is not just a selection or halo effect!) but at differing degrees. For instance, performance evaluations for those with a masters in accounting may start off higher than those with a MBA, but longer term, it appears that MBAs win out. VERY INTERESTING! [FinanceProfessor.com Annotation]

The public's misconception of what auditors do stands as a yawning fissure between CPAs and investors. How will the profession solve the problem?

In the wake of accounting scandals at companies like WorldCom, Tyco and Enron, Congress and regulators focused on the apparent conflict between accountants who were doing audits while earning high-margin consulting fees at the troubled firms. In a burst of reform, most accounting firms were forced to separate their auditing and consulting businesses. A new Wharton paper, however, challenges the idea that lucrative consulting contracts routinely lead auditors to look the other way when preparing financial audits. The paper, by Wharton accounting professors David Larcker and Scott Richardson, is titled "Fees Paid to Audit Firms, Accrual Choices and Corporate Governance."

Note: Older EBF articles are not currently online. I'm not sure if this is temporary or permanent. If you click you will be taken to the Archive.org site to find an archived copy.

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Companies today can no longer give a full picture of their value using traditional methods. There is now no excuse for failing to give the market what it wants.

Editor's Note: see more details of the PwC ValueReporting framework at
http://www.valuereporting.com

Audit firms have gotten tougher-and board audit committees have, too.

Find a wide selection of interviews with business luminaries in our Interviews Section

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One of the world's most recognized and respected authorities on intellectual capital offers his observations on how to manage and value one of the most challenging and dynamic issues facing business leaders today, intangible assets. Lev is a frequent witness in litigation involving intellectual capital, and a frequent and vocal critic of traditional accounting. He is also the leading exponent of a new, knowledge-based approach to accounting.

Now open to public scrutiny, FASB's codification tool is a one-stop shop for both accounting experts and newbies.