The Treatment of Non-Recurring Items in the Income Statement and their Consistency with FASB Concept Statements

This study provides evidence on the consistency of Accounting Principles Board Statement No. 30 (APB, 1973) classification criteria with the objectives of the Financial Accounting Standards Board's Concept Statements Nos 1 and 2 (FASB, 1978, 1980). It is hypothesized that the current APB 30 requirement to classify items of a non-recurring nature in the operating section of the income statement decreases the predictive ability of income before extraordinary items. A random sample of 50 firms with non-recurring adjustments to income, which were included in the operating section of the income statement, was selected from Standard and Poor's Corporation Records. Naive models were used to generate earnings per share forecasts for the year in which the adjustment to income occurred, the prior year and subsequent year.
The results indicate a statistically significant decrease in the predictive ability of earnings per share before extraordinary items associated with the year that the adjustment occurred and a significant increase in the variability of earnings per share. Also, differences in predictive ability were noted between small and large firms and firms with positive and negative adjustments to income.
The results of this study also imply that the managers of most firms with negative adjustments to income are not using the adjustments to smooth income for either the purpose of decreasing the variability of earnings or increasing predictability. The results are more consistent with the 'big bath' theory. These conclusions appear to be more relevant for smaller firms than larger firms.     

The effects of water hardness level on washing quality using commercial laundry detergents

The water hardnesses were determined for 10 samples of water. A wide variation of water hardnesses were found ranging from very soft to very hard. The effectiveness of six commercial laundry detergents of different formulations were evaluated. The detergent containing a non-ionic surfactant with a phosphate builder was found to give the best whiteness results, regardless of water hardness. Because of the possible environmental problems associated with the use of phosphates, consumers may wish to select the next most effective detergent formulation, which varied between water samples.     

Congress and the Federal Reserve

We examine legislative activity to determine when Congress threatens the Fed and whether this pressure affects monetary policy. By the late‐1980s Congress shifted from threatening when unemployment was high to threatening when inflation was high. We use the Romer and Romer monetary shocks to isolate changes in the federal funds rate that cannot be explained by economic conditions and ask whether these shocks respond to pressure. In the 1970s, the Fed responded to bills credibly threatening Fed powers by lowering the federal funds target below that prescribed by current and forecast economic conditions. However, this accommodation ceased in the mid‐1980s.     

COUNT DATA REGRESSION USING SERIES EXPANSIONS: WITH APPLICATIONS

A new class of parametric regression models for both under- and overdispersed count data is proposed. These models are based on squared polynomial expansions around a Poisson baseline density. The approach is similar to that for continuous data using squared Hermite polynomials proposed by Gallant and Nychka and applied to financial data by, among others, Gallant and Tauchen. The count models are applied to underdispersed data on the number of takeover bids received by targeted firms, and to overdispersed data on the number of visits to health practitioners. The models appear to be particularly useful for underdispersed count data. © 1997 John Wiley & Sons, Ltd.     

It's the Economy Stupid: Macroeconomics and Federal Elections in Australia

In this paper we examine the impact of macroeconomic conditions on Federal electoral performance in 20th-century Australia. We find that the electorate penalizes a government for high inflation and high unemployment relative to trend. Real GDP growth and real wage growth were not found to have a systematic relationship with incumbent vote share at the Federal level. We also examine the voteshare of the Federal incumbent in three electorates: the safe Liberal seat of Kooyong, the safe Labor seat of Melbourne Pans, and the swinging seat of Latrobe. We find some evidence that unemployment affects electoral outcomes in the swinging seat, but no macroeconomic variables affect outcomes in the safe seats.     

The effect of water hardness on washing performance of built and unbuilt surfactants

Five different surfactants were used at 2.0% concentrations. The most and least effective were found to be Synthrapol N and Ahcowet RS respectively; based on their rating of whiteness index. Synthrapol N and Ahcowet RS were evaluated with the addition of sodium carbonate, sodium tripolyphosphate and a 1:1 combination of the two builders. In both cases the addition of a builder improved the cleaning efficiency of the surfactant. Although each builder alone improved the cleaning efficiency, the combination of sodium carbonate and sodium tripolyphosphate improved efficiency at a lower total concentration.     

Indirect Tax Exemptions and the Distribution ot Lifetime Income: A Simulation Analysis*

This paper uses a simulation model to compare the lifetime consequences of a revenue neutral partial shift towards a consumption tax, involving exemptions, with its cross-sectional effects. Exemptions of goods consumed proportionately more by lower income groups reduce the inequality of the distribution of net lifetime consumption by more than in the cross-sectional case. However, the tax shift increases lifetime inequality by more than it increases cross-sectional inequality, and the net effect is that exemptions cannot compensate for the income tax change. Concern with inequality is most appropriately handled by raising transfer payments rather than introducing exemptions.