Battles in the costing war: UK debates, 1950-75

In the UK, 1950-75 was a lively period in the long-running debates between proponents of absorption and marginal costing. In the nexus of competing interests, management accountants advocated and defended rival costing systems with much vigour and passion. Expressed in the language of the times, these debates were 'battles' in the costing 'war'. We focus on these battles, analysing the various forces that operated upon the combatants, and locate them in the wider costing war. We conclude that no final resolution of the conflict was achieved in the twentieth century, nor is one likely in the foreseeable future.     

Accounting for Option–based Compensation: The Economic Cost Approach

The intrinsic value approach amortizes over the life of the option, the difference between the stock price on the date of the grant and the exercise price of the option. The fair market value approach amortizes over the life of the option, the market value of stock options on the date of the grant. These approaches do not reflect the changes in the option–based compensation cost after the grant date. This paper proposes an economic cost approach that not only adjusts for the changes in the value of the options during its life but also records the issuance of the stock at fair market value on the exercise date.     

Quasi‐rational and ex ante price expectations in commodity supply models: an empirical analysis of the US broiler market

A statistically optimal inference about agents' ex ante price expectations within the US broiler market is derived using futures prices of related commodities along with a quasi‐rational forecasting regression equation. The modelling approach, which builds on a Hamilton‐type framework, includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components. We therefore infer the relative importance of various informational sources in expectation formation. Results show that, in addition to the quasi‐rational forecast, the true supply shock, future prices, and ex post commodity price forecast errors have, at times, been influential in broiler producers' price expectations. Copyright © 2003 John Wiley & Sons, Ltd.     

UNIT MANAGEMENT BUYOUTS, STOCKHOLDER WEALTH, AND SELLING FIRMS' CHARACTERISTICS

Previous research on unit management buyouts, UMBs, has shown that selling firms benefit from the selloff transaction. The current research demonstrates that when the selling firm has either poor liquidity or poor earnings, selling firm shareholders do not benefit as much. We hypothesize that the unit managers have knowledge about the selling firm's difficulties so they do not pay as large a premium for the assets. Since the unit managers technically are employed by the selling firm shareholders, their bargaining to achieve a better price is an agency cost. Finally, selloff frequency does not affect seller abnormal returns.     

LOGISTICS SALIENCE IN A CHANGING ENVIRONMENT

The primary purpose of this paper was to empirically explore some of the reasons that logistics has become more important, or salient, in comparison to other functions within the firm. A survey of 296 managers across multiple industries in the U.S. found logistics becomes more important within the firm when the industry increases in uncertainty, when there is an emphasis on time‐based competition, when there is greater adoption of information technology, and when there is an emphasis on cross‐functional integration.     

Choice of Accounting Method for Valuation of Investment Securities: Evidence from Hong Kong Firms

This study examines whether Hong Kong managers choose “benchmark” or “alternative” valuation method for investment securities, after the Hong Kong SSAP 24 became effective starting with fiscal‐year ending December 31, 1999. Tests are conducted on a sample of 292 firms, out of which 155 Hong Kong firms reported unrealized gains and losses and 128 firms that did not report holding gains/losses, but reported investment securities. The findings indicate that firms with strong relative performance, i.e. current year's EPS higher than that of the last year, chose the alternative valuation method when the investment securities had holding gains and recognized the unrealized holding gains in the equity section of the balance sheet. This finding is consistent with the Cookie Jar hypothesis because these holding gains would be used in the income statement in future periods, when needed. With regard to firms with strong relative performance and holding losses, the findings indicate that the benchmark valuation was used. The losses were reported in the income statement to the extent that they did not reduce the EPS below that of the last year. This finding is consistent with the Income Smoothing Hypothesis, because the use of benchmark valuation reduced EPS of the current year to bring it in line with that of the last year. Evidence on firms with weak economic performance and holding gains or losses provided weak support to the Income Smoothing Hypothesis and Big Bath Hypothesis. Additionally, the results indicate that the firms with high debt‐equity ratio preferred the benchmark method and recorded securities at cost. This treatment provided managers with an opportunity to liquidate or reclassify the securities in future periods and use the accrued gains, when needed. The findings are inconclusive with regard to the impact of bonus plan on the choice of valuation method.