Finance, Politics, and the Accounting for Stock Options

The politics of option accounting crosses party lines, reflecting both the interests of the affected constituencies and the desire for power over standard setting. House Bill HR-3574, which mandates an assumption of zero stock price volatility, runs counter to the recently passed Financial Accounting Standards Board (FASB) rule requiring fair-value expensing of stock options. For any option issued at or out of the money, where strike prices are normally set, expense recognition is zero under this bill's mandated assumption.
Besides excessive use of stock options, the lack of a "final peace" in the option accounting war appears to have encouraged another questionable corporate practice. This article examines a sample of "six-and-one restructurings," exchanges of options in which expensing of re-priced (deep out-of-the-money) options can be avoided if employees wait at least six months and one day before receiving new options. The authors found that market-adjusted stock prices tend to decrease during the six-month period before the strike price is reset. This result provides one more reason why companies should be required to use fair-value option pricing models to expense options.     

Ethical Exemplification and the AICPA Code of Professional Conduct: An Empirical Investigation of Auditor and Public Perceptions

This research applies the impression management theory of exemplification in an accounting study by identifying and measuring differences in both auditor and public perceptions of exemplary behaviors. The auditors were divided into two groups, one of which reported self-perceptions (A-S) while the other group reported their perceptions of a typical auditor (A-O). There were two separate public groups, which gave their perceptions of a typical auditor and were divided based on their levels of accounting sophistication. The more sophisticated public group was comprised of bank loan officers (LO) while the less sophisticated public group consisted of investment club members (IC). Comparisons were made on 30 behaviors contained in the AICPA Code of Professional Conduct, which served as the basis for the research instrument. Profile analysis, a special form of MANOVA technique, was used to analyze the results. A-S perceptions were the highest of the four treatment levels and were significantly higher (i.e., more exemplary) than the perceptions of both the A-O and LO groups. The more sophisticated user group (LO) provided the lowest perceptions of the four treatment levels. For at least four of the six measures, the LO treatment group perceived the typical auditor to be less exemplary than both the IC and A-O treatments. There were no differences in perceptions between the A-O group and IC. Additional analysis revealed that auditors overrated the degree to which the public relied on financial statements. However, both public groups reported a reasonably high level of reliance on financial statements when making decisions. Philip A. Brown is an Associate Professor and Directtor of the Accounting Program at Harding University in Searcy, Arkansas. He has a bachelor's degree from Harding University, an MBA from West Virginia University and a Ph.D. from the University of Mississippi. His research interests are in accounting ethics and in accounting education. He has published in Advances in Accounting, The Journal of Accounting and Finance Research, and others. He is a CPA in the State of Arkansas. Morris H. Stocks serves as the Dean of the Patterson School of Accountancy at the Universtiy of Mississippi. He received his undergraduate degree in accounting from Trevecca Nazarene University, his Masters degree from Middle Tennessee State University and his Ph.D. from the University of South Carolina. He is a Certified Public Accountant in the State of Mississippi. He is a behavioral accounting researcher and has published in Accounting, Organizations and Society, Accounting Horizons, Behavioural Research in Accounting, Decision Sciences Journal, Advances in Accounting, Advances in Accounting Information Systems, Advances in Behavioral Accounting Research, Accounting, Auditing and Accountability Journal, Advances in Taxation and others. W. Mark Wilder is KPMG Lecturer and Associate Professor of Accountancy at The University of Mississippi. His educational background includes a bachelor's degree in mathematics from The University of Alabama, an MBA from the University of South Alabama, and a Ph.D. in Accounting from Florida State University. He is a CPA in the State of Mississippi. Mark has published in Accounting Horizons, Advances in Taxation, the Journal of Applied Corporate Finance, the Journal of Computer and Information Systems, the CPA Journal, and others. In the past 2 years he has received several awards, including the top two campus-wide faculty awards at Ole Miss and also the MSCPA Outstanding Educator Award. In 2004 he was inducted into the Alabama Tennis Hall of Fame.     

The Year in Review: Economics at the Antitrust Division, 2020–2021

Challenging anticompetitive acquisitions of nascent competitors is a top priority of the Antitrust Division of the U.S. Department of Justice. It is especially important that competition agencies remain vigilant of such acquisitions in platform markets, where indirect network effects and other market forces tend to preserve the status quo at the expense of smaller, more innovative rivals and potentially final consumers. This article discusses two such attempted acquisitions: (1) Visa’s acquisition of technology firm Plaid that threatened to disrupt Visa’s monopoly power in online debit; and (2) Sabre’s acquisition of Farelogix, which is a firm that allows airlines to connect directly to travel agencies and thereby disintermediates Sabre and other global distribution systems.

     

Driving under the influence of alcohol in Cali,Colombia: prevalence and consumption patterns, 2013

This study's goal was to establish the prevalence of driving under the influence of alcohol (DUI) and alcohol consumption patterns among drivers in Cali, Colombia, in 2013. A cross-sectional study based on a roadside survey using a stratified and multi-stage sampling design was developed. Thirty-two sites were chosen randomly for the selection of drivers who were then tested for blood alcohol concentration (BAC) and asked to participate in the survey. The prevalence of DUI was 0.88% (95% confidence intervals [95% CI] 0.26%–1.49%) with a lower prevalence when BAC was increasing. In addition, a higher prevalence was found during non-typical checkpoint hours (1.28, 95% CI ?0.001%–0.03%). The overall prevalence is considered high, given the low alcohol consumption and vehicles per capita. Prevention measures are needed to reduce DUI during non-typical checkpoints and ongoing studies are required to monitor the trends and enable the assessment of interventions.     

Ten Years of the 2010 HMG: A Perspective from the Department of Justice

Review of Industrial Organization - Ten years after their release, the 2010 Horizontal Merger Guidelines continue to reflect accurately current legal and economic principles of antitrust. Despite...     

Old Age Relief Policy Prior to 1900: The trend Toward Restrictiveness

Abstract . Between the 17th and the 19th centuries old age relief policy in America became increasingly restrictive. One indication of this was the trend toward greater emphasis on the almsbouse as opposed to “outdoor relief” and other noninstitutional alternatives. This trend can be accounted for, in part, by the emerging market economy and the ideological concomitants of this change. Another important factor was the influx of immigrants who did not share a common ethnic background with those who had come during the colonial era. Environmental factors such as the abundance of land and the physical dangers associated with frontier life also had a major impact on the way in which English ideas about poor relief were adapted and how these policies evolved over the years. These differences led to an even stronger commitment to an ideology of individualism than in England.     

Barriers to sustainability for small and medium enterprises in the framework of sustainable development—Literature review

The objective of this article is to analyze the barriers faced by small and medium enterprises (SMEs) when implementing initiatives for sustainable development. For this purpose, a search equation was designed, and the 50 highest cited articles from the search results in Scopus between years 2013 and 2017 were reviewed. The selected criteria for the article analysis were article name, article year, country, continent, journal, Scimago Journal Rank, Scimago Quartiles, Affiliated Universities, abstract, and keywords. Among the main results, 175 barriers to sustainability for SMEs were identified. The barriers that appeared most frequently were lack of resources, the high initial capital cost of implementing sustainability measures, and lack of expertise. At the end of the article, a proposal is included which shows the 175 identified barriers, classified by “sector,” “sustainability tool,” and “internal/external” which can aid in new qualitative and quantitative studies of barriers to sustainability in SMEs.     

Alternative profitability measures and tests of the structure-performance relationship

This paper compares the inferences gained when alternatively specifying Census-based price-cost margin and IRS-based accounting rate of return as the dependent variable in conventional structure-performance models. We find important differences between the structure-performance inferences of the alternative specifications of the profit measure. Further, the alternative profit measures are not highly correlated.The authors acknowledge the constructive comments of an anonymous referee.