Functional fixation in product pricing: A comparison of individuals and groups

This study tests the functional fixation hypothesis by comparing changes in the product pricing decisions of individuals and small groups in response to a fully disclosed, cosmetic change in depreciation method. The study provides several methodological refinements over earlier related studies. The research design incorporates full disclosure of the effect of accounting differences and a variety of measures are used to assess the impact of the accounting change, these revealing the inadequacy of the aggregate measures employed in earlier studies. Furthermore, the paper includes a comparison of the quality of group versus individual decision making with respect to functional fixation. The findings indicate that while individuals have a more pronounced shift in decision models than do groups, neither individuals nor groups fully adjust for the change.     

Accounting education literature review (1991–1997), part II: students,educational technology,assessment and faculty issues

This paper updates literature reviews by Rebele et al. (1991)and Rebele and Tiller (1986)by reviewing a subset of the accounting education literature published during the period 1991–1997. In a preceding paper (Part I), Rebele et al. (1998)reviewed accounting education articles related to two topics: curriculum and instructional approaches. In this paper (Part II), we review articles related to the topics of students, educational technology, assessment and faculty issues, published primarily in the following five journals: Journal of Accounting Education, Issues in Accounting Education, The Accounting Educators' Journal, Accounting Education: A Journal of Theory, Practice and Research and Accounting Perspectives. Recommendations for future research are offered at the end of each major section. An appendix identifies instructional cases and educational resources published in accounting education journals during the 1991–1997 period.     

The mixed attribute model in SFAS 133 cash flow hedge accounting: implications for market pricing

In this study, we examine the pricing of cash flow hedge adjustments reported in other comprehensive income (OCICF), under the mixed attribute model in SFAS 133 Accounting for Derivative Instruments and Hedging Activities. Our OCICF pricing investigation integrates empirical research on the derivatives use that gives rise to such mark-to-market adjustments with the accounting information pricing literature. Based on this integration, we generalize mispricing theory for the SFAS 133 mixed attribute model and predict both the direction and magnitude of OCICF pricing. Screening on U.S. multinationals with ex ante exposure to currency risk, we provide evidence of OCICF mispricing in the expected direction, consistent with the notion that SFAS 133 cash flow hedge accounting results in a mixed attribute problem (Gigler et al. in J Account Res 45:257–287, 2007). Moreover, we find that both OCICF gains and losses are inversely related to future cash flows and of the expected magnitude, consistent with our predictions based on valuation theory (for example, Ohlson in Rev Account Stud 4:145–162, 1999). Our results support the Financial Accounting Standards Board’s concern that the SFAS 133 mixed attribute model does not provide the information necessary for investors to understand the net economic effects of derivatives use (FASB in Accounting for financial instruments and revisions to the accounting for derivative instruments and hedging activities. FASB, Norwalk, 2010).     

Accounting education literature review (1991–1997), part I: Curriculum and instructional approaches

This paper updates the work of Rebele, Stout, and Hassell (A review of empirical research in accounting education: 1985–1991. Journal of Accounting Education, I, 167–231, 1991) and Rebele and Tiller (Empirical research in accounting education: A review and evaluation. In A. C. Bishop, E. K. St. Pierre and R. L. Benke (Eds), Research in Accounting Education, 1–54. Harrisonburg, VA: Center for Research in Accounting Education, James Madison University, 1996) by reviewing a subset of the accounting education literature published during the period 1991–1997. Specifically, we review articles (both empirical and nonempirical) related to the accounting curriculum and instructional approaches in accounting that were published in the following journals: Journal of Accounting Education, Issues in Accounting Education, The Accounting Educators' Journal, and Accounting Education: A Journal of Theory, Practice and Research. A second paper, Part II, will review articles published in these same journals during the period 1991–1997 on the topics of assessment, use of technology, students, faculty concerns, cases, and instructional resources.     

Accounting education literature review (1997–1999)

By reviewing a subset ot the accounting education literature published during the period 1997–1999, this paper updates literature reviews by Rebele, Apostolou, Buckless, Hassell, Paquette, and Stout [Rebele, J.E., Apostolou, B.A., Buckless, F.A., Hassell, J.M., Paquette, L.R., & Stout, D.E. (1998a). Accounting education literature review (1991–1997), part I: curriculum and instructional approaches. Journal of Accounting Education, 16(1), 1–51.] [Rebele, J.E., Apostolou, B.A., Buckless, F.A., Hassell, J.M., Paquette, L.R., & Stout, D.E. (1998b). Accounting education literature review (1991–1997), part II: students, educational technology, assessment, and faculty issues. Journal of Accounting Education, 16(2), 179–245.]; Rebele, Stout, and Hassell [Rebele, J.E., Stout, D.E., & Hassell, J.M. (1991). A review of empirical research in accounting education: 1985–1991. Journal of Accounting Education, 9(2), 167–231.]; and Rebele and Tiller [Rebele, J.E., & Tiller, M.G. (1986). Empirical research in accounting education: a review and evaluation. In A. C. Bishop, E. K. St. Pierre & R. L. Benke (Eds.), Research in accounting education (pp. 1–54). Harrisonburg, VA: Center for Research in Accounting Education, James Madison University]. We review published articles related to the topics of assessment, curriculum and instructional approaches, educational technology, faculty issues, and students from the following five journals: Journal of Accounting Education, Issues in Accounting Education, Accounting Education, The Accounting Educators’ Journal, and Advances in Accounting Education. A large number of accounting educators have contributed to the literature between 1997 and 1999, with over 390 different authors cited in the body of the text (30 authors published two articles, 11 published three, and one author published four articles). More than 120 individuals are cited as authors of cases and instructional resources (seven authors published two cases and one published three). Recommendations for research are offered at the end of each major section. An appendix identifies instructional cases and educational resources published during the 1997–1999 period by journal and topic.     

Why is research on management accounting change not explicitly evolutionary? Taking the next step in the conceptualisation of management accounting change

In this article we discuss the evolutionary foundation of the OIE-guided management accounting change research building on the framework of [Scapens R.W. 1994. Never mind the gap: towards an institutional perspective on management accounting practice. Management Accounting Research, 5, 301–321.] and [Burns, J. and Scapens, R.W., 2000. Conceptualizing management accounting change: an institutional framework. Management Accounting Research, 11, 3–25.]. We argue that research on management accounting change should be based on evolutionary theory, but that the full potential of evolutionary theory has not yet been described or used in management accounting research. The conceptualisation and understanding of management accounting change can be improved and expanded if the evolutionary approach is developed beyond the general belief that it describes only small and gradual, often slow, changes. In this article we show that an evolutionary perspective on management accounting change implies that management accounting’s development is explained as the interaction between the evolutionary sub processes of retention (inheritance), variation and selection. Thus, both continuity and change are seen as evolutionary outcomes. These processes follow the cumulative causality that Charles Darwin proposed and Thorstein Veblen applied to the social sciences. Such a comprehensive theory, here labelled Universal Darwinism, must, however, be given substance with supporting details.     

Do cost-based pricing biases persist in laboratory markets?

Past accounting experiments have demonstrated significant effects of absorption vs variable costing systems on pricing decisions, but in individual settings that suppressed market features. The main finding of the current study is that a cost-based pricing bias did not persist in laboratory product markets. Given the opportunity to learn from profit and market feedback, sellers revised their price offers toward optimum in a manner that compensated for absorption vs variable cost signals. The effects of demand conditions, as revealed through actual trades, dominated the effects of alternative costing systems.     

The Transformation of an Accounting System During Organisational Change: A Longitudinal Study

Accounting can both shape and be shaped by organisational reality (Nahapiet, 1988). This paper focuses on the shaping of an ABC (activity based costing) system in a public sector authority during a period of rapid change from 1993 to 1998. The reasons why management invested substantially in such a system are outlined, and are compared and contrasted with the views of the employees. Over time the ABC system became locked in as the transfer pricing system to meet the needs of a new style of business unit accountability where quasi–profit centres were set up within a public sector authority. A new CEO eliminated the profit–centre concept and returned to budgetary control as the primary form of financial accountability. At this stage ABC became side–lined but was still useful for strategic decisions relating to out–sourcing and improving lines of business, more in line with its initial objectives. Finally, the paper explores why ABC ceased to exist. It is a rare case of a longitudinal study of an accounting technology in a public sector organisation and provides insights into the moulding of accounting by organisational change.     

Total accounting in action: reflections on sten Jönsson’s Accounting for Improvement

Sten Jönsson’s recent book Accounting for Improvement (1996) examines organizational change processes based on several in-depth case-studies, conducted during a period of about ten years. In this review essay the arguments of the book are placed alongside recent discussions on management accounting practices, which have increasingly discovered the “hidden” potential of accounting and accountants. Jönsson’s book offers exciting insights into organizational improvement processes, which are linked to accounting in a particularly broad, “total accounting” sense. The major limitation of the book is held to be that it places accountants in the background of the analysis, perhaps reflecting problems in empirical research designs of the case-studies. As a result, the relationships and communication patterns between accountants and line personnel remain largely unexamined.     

Accounting education literature review (2010–2012)

This review of the accounting education literature includes 291 articles and 104 instructional cases published over the 3-year period, 2010–2012, in six journals: (1) Journal of Accounting Education, (2) Accounting Education: An International Journal, (3) Advances in Accounting Education, (4) Global Perspectives on Accounting Education, (4) Issues in Accounting Education, and (6) The Accounting Educators’ Journal. This article updates prior literature reviews by organizing and summarizing recent additions to the accounting education literature. These reviews are categorized into four sections corresponding to traditional lines of inquiry: (1) curriculum, assurance of learning (AOL), and instruction; (2) educational technology; (3) faculty issues; and (4) students. Suggestions for educational research in all content areas are presented. For the first time in this series of literature reviews, we assess the data collection and empirical analysis methods and recommend adoption of more rigorous techniques moving forward. Articles presenting teaching materials and educational cases published in the same six journals during 2010–2012 are presented in an appendix, categorized by the courses for which they are appropriate.     

Is accounting a global or a local discipline? evidence from major research journals

Accounting research is torn between two competing forces. On the one hand, a quest for general results and internationalization of financial markets calls for a global approach and international co-operation. On the other hand, domestic institutional settings call for research that deals with the relevant problems of the existing accounting systems. In this paper we address the issue of how global or local the accounting research community currently is through an analysis of empirical studies published by six leading English language accounting research journals from the U.S.A., Europe and Australia, during the period 1984–1993. Our findings indicate that accounting still is a rather local discipline by nature: both empirical evidence and authors are significantly clustered along country lines. We find that 77% of papers fall in a category where the origin of the researcher, data and the journal, is the same. Especially there is a close link between the origin of the researcher and that of the data. The interpretation of the empirical findings lead us to a view of competing research élites. A powerful and currently dominating U.S. academic élite is centred around The Accounting Review, the Journal of Accounting Research and the Journal of Accounting and Economics; and an emerging, mostly European élite around Accounting, Organizations and Society. The functioning of research élites produces competing quality criteria which are intertwined with methodological and cultural issues. The emerging “policentric oligarchy” of research élites helps to remove institutional barriers to the knowledge production process and offers legitimate outlets for a wider range of approaches.     

Data Fixation and the Use of Traditional Versus Activity-Based Costing Systems

An important debate in the contemporary accounting literature relates to the relative merits of activity-based versus volume-based product costing methodologies. Traditional volume-based costing systems are said to be flawed and may seriously mislead strategic decision making. Such arguments assume that decision makers use such information in an unproblematic way. This article reports on an experiment designed to investigate whether decision makers are able to overcome data fixation in a setting involving the use of product cost information. In response to criticisms of previous accounting studies of data fixation, subjects received some feedback after each decision, and were rewarded based on performance. The experiment involved subjects making a series of production output decisions based on detailed case information of a hypothetical firm facing different market conditions for each decision. A between-subjects design was utilized with two cost system treatments: activity-based costing (ABC) and traditional costing (TC). It was hypothesized that the group provided with ABC cost data would make 'optimal' decisions and the group provided with TC cost data would overcome fixation. The results of the experiment indicated that there was, in general, evidence of data fixation among TC subjects, but a small number of subjects did adjust to ABC costs. These results are discussed in the light of previous research and some future directions are outlined.     

The reform of accounting standards and audit pricing

This paper focuses on the reform of accounting standards in China in 2007 and investigates its impact on equilibrium pricing in the audit market. We find that the concentration of the audit market and the probability of issuing modified audit opinions do not significantly change, but that audit fees increase significantly after the adoption of the new accounting standards in China. Deeper analysis suggests that (1) the implementation of the new IFRS-based Chinese Accounting Standards (CASs) has increased the market risk faced by listed firms and thus auditors’ expected audit risk, causing an increase in audit fees, and (2) the degree of the increase in audit fees is positively related to the adjusted difference between net income according to the old CAS before 2007 and the new CAS after 2007. We thus conclude that the reform has had a significant impact on audit pricing in China.     

Differences between domestic accounting standards and IAS: Measurement,determinants and implications

This study analyzes determinants and effects of differences between Domestic Accounting Standards (DAS) and International Accounting Standards (IAS). We use an extensive list of differences between DAS and IAS to create two indices, absence and divergence. Absence measures the extent to which the rules regarding certain accounting issues are missing in DAS but are covered in IAS. Divergence applies in circumstances where the rules regarding the same accounting issue differ in DAS and IAS. It measures the extent of differences between DAS-based rules and IAS-based rules.     

Methodological problems in functional fixation research: Criticism and suggestions

Accounting researchers have long been interested in how users of accounting information process the information in making decisions. One line of research argues that users become “functionally fixated” on the outputs of accounting systems. This line of research argues that form rather than substance becomes more important to (fixated) decision makers. This paper reviews the methodology employed in the accounting studies done to date. It concludes that flaws in the methodology used in these studies prevent us from determining if fixation exists. More importantly, these methodological flaws prevent us from answering the question of why it exists, if it does. The paper offers an alternative methodology to the one currently employed which it is argued will provide insights into the question.     

Depreciation Rules and the Relation between Marginal and Historical Cost

The reported cost of a product frequently contains historical cost components that reflect past investments in productive capacity. We examine a setting wherein a firm makes a sequence of overlapping capacity investments. Earlier research has identified particular accrual accounting (depreciation) rules with the property that, on a per unit basis, the historical cost of a product captures precisely its marginal cost. Relative to this benchmark, we investigate and characterize the direction and magnitude of the bias in reported historical cost that results from alternative depreciation rules, including in particular straight‐line depreciation in conjunction with partial direct expensing. In addition, we demonstrate that for a reasonable range of parameter specifications the resulting bias is rather small. Finally, we apply our framework to two specific settings. First, in a regulatory context, we establish the extent to which the accounting profit margin is indicative of a firm's pricing power in the product market. Second, we model an internal control scenario in which a manager's performance is evaluated using residual income, and identify the distortions in investment levels that result from the use of alternative depreciation rules.     

Developments in accounting regulation: A synthesis and annotated bibliography of evidence and commentary in the 2017 academic literature

In this paper, recent regulation-related findings and commentaries in the academic literature are synthesized in annotated bibliography form. This annotated bibliography is one in a series of bibliographies that summarizes regulation-related academic research. Papers in top accounting outlets such as The Accounting Review, Journal of Accounting Research, Journal of Accounting and Economics, Contemporary Accounting Research, Accounting Horizons, The Journal of Accounting, Auditing & Finance, Journal of Accounting and Public Policy, Journal of Business, Finance & Accounting, The Journal of Financial Reporting, Auditing: A Journal of Practice and Theory, Research in Accounting Regulation and Review of Accounting Studies are included. Threads in the 2017 literature included general regulatory accounting issues, general financial reporting issues, examinations of the impact of specific guidance, and examination of issues surrounding the independent audit.     

Expanding your accounting classroom with digital video technology

In the past, many activities of accounting professors were restricted or confined by their classroom walls. Bringing in guest speakers, taking students on field trips and teaching students off-campus (either locally or globally) were extraordinary efforts that required significant organization. Today, numerous technological advancements in communication infrastructure, equipment and online tools greatly facilitate such initiatives. Outside experts can now visit the classroom, students can explore or collaborate in distant places and professors can extend the geographical reach of their lessons simply via the means of digital video technology. Based on our 2010 Conference on Teaching and Learning in Accounting (CTLA) Master Class, we share our experiences in exploring the use of digital video in teaching accounting and explain how numerous accounting professors are taking advantage of the capabilities afforded by digital video technologies. Online video clips, student video projects, and online video lecture recordings hold great promise for accounting education. We have created a website that complements and demonstrates the teaching ideas presented in this article and that facilitates video integration into accounting courses. We discuss the pedagogical benefits of using video, including those from general education and accounting literature. The article concludes with suggestions for how accounting faculty can keep current with video technology, areas for future accounting research and a call to action for accounting educators. Our work with digital video technology has led to the 2011 American Accounting Association (AAA) Innovation in Accounting Education Award as well as the 2010 Canadian Academic Accounting Association (CAAA) Howard Teall Innovation in Accounting Education Award.