Disability Costs and Equivalence Scales in the Older Population in Great Britain

We use a standard of living (SoL) approach to estimate older people's disability costs, using data on 8000 individuals from the U.K. Family Resources Survey. We extend previous research in two ways. First, by allowing for a more flexible relationship between SoL and income, the structure of the estimated disability cost and equivalence scale is not dictated by a restrictive functional form assumption. Second, we allow for the latent nature of disability and SoL, addressing measurement error in the disability and SoL indicators in surveys. We find that disability costs are strongly related to severity of disability, and vary with income in absolute and proportionate terms. Older people above the median disability level require an extra £99 per week (2007 prices) on average to reach the SoL of an otherwise similar person at the median. Costs faced by older people in the highest decile of disability average £180.     

DIVERGENCE OF OPINION AND LONG‐TERM PERFORMANCE OF INITIAL PUBLIC OFFERINGS

Miller's hypothesis posits that divergence of opinion can lead to asset overvaluation and subsequent long‐term underperformance in markets (such as initial public offerings [IPOs]) with restricted short‐selling. Consistent with this hypothesis, we find that early‐market return volatility, a proxy for divergence of opinion, is negatively related to subsequent IPO long‐term abnormal returns. This relation holds after accounting for other factors that previous studies suggest affect long‐term abnormal returns for IPOs (including another proxy for divergence of opinion). Moreover, we find that this relation is stronger in IPO markets than in non‐IPO markets (where short‐selling restrictions are less stringent), again consistent with Miller's hypothesis.     

Derivative financial instrument use in Australia

This paper examines the relation between derivatives use and financial characteristics of Australian industrial and mining firms. The firm characteristics proxy for financial distress, tax losses, managerial ownership, growth opportunities, the ability to generate operating cash flows and liquidity. We also control for firm size, dividends and exposure to foreign exchange risk. The results show that firm size and leverage are the main explanatory variables for derivative use for both industrial and mining firms     

Empires of the sky: determinants of global airlines' accounting-policy choices

This study quantifies the current level of diversity observed in airline accounting and examines possible determinants that explain accounting-policy choices by the global airline industry. Airlines' accounting-measurement policy for unrealized foreign-exchange differences and their disclosure of frequent-flyer information remains diverse. Inferential statistics shows that larger airlines tend to take unrealized foreign-exchange differences directly to equity and tend to disclose frequent-flyer accounting policy, while airlines with lower leverage tend to disclose frequent-flyer accounting.     

Application Of The Reporting Entity Concept To Universities

The Australian Accounting Research Foundation's Statement of Accounting Concept 1 "Definition of the Reporting Entity" refers to dependent users and outlines three factors to be considered in determining whether dependent users exist. This study applies these factors to the tertiary education sector and concludes that public-sector universities can legitimately be deemed reporting entities and should produce financial reports that fully comply with Australian accounting standards and concepts. In the light of this conclusion, the universities' annual reports are examined to determine whether there has generally been compliance. The study finds that 90% of the sampled university reports deviate from Australian accounting standards.     

Health care reform and reform for health: creating a health system for communities in the 21st century

If we are to improve the health of the population and reduce the inequalities in health that plague our communities and our planet, we will have to give greater attention to the determinants of health. The reform of the health care system, necessary though it is, will never be sufficient; we need to reform our whole society and in particular to focus on human rather than economic development. At the community level we need to create healthy communities that are “health-creating systems” of environmental, social and human development, as well as health care systems that focus first on improving and maintaining health. Such a “bottom-down” health care system would see the hospital become once again the place of last resort (but still a potentially important partner in creating healthier communities) and would focus instead on how to provide health promotion and health care from the household level up.     

A Proposal for Expensing Employee Compensatory Stock Options for Financial Reporting Purposes

This article presents an accounting approach for employee stock options based on the insight that the currentperiod compensation expense should reflect only that part of the option value that is earned independent of the obligation of continued employment. Given that the maturity of vested options is typically shortened to 90 days when an employee resigns or is terminated, this method views the employee as owning a 90-day option (even if the stated maturity of the option is ten years) and earning a 90-day extension to that option each quarter as a result of the employee's continued employment. In the case of vested options, the compensation expense in each quarterly accounting period is thus the value of the 90-day extension of the option's maturity. There is no option expense in the quarter when the option is either exercised or expires.
In the case of unvested options, the expected option value at vesting should be estimated quarterly starting at the time of grant and the corresponding estimated expense should be revised and allocated as a pro rata accrual each quarter over the vesting period. The cumulative expense over the entire vesting period will equal the fair market value of the option at its vesting date.
Besides reflecting the economics of the exchange of value for labor involved in stock option grants, this approach has a number of practical advantages:

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  The 90-day maturity permits the use of publicly traded options to determine fair market value and makes Black-Scholes and other (lattice) pricing models more reliable.