IM_CH_09 - Chapter 9: Uniformity and Disclosure: Some...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 9: Uniformity and Disclosure: Instructor’s Manu al Some Policy-Making Directions 7 th edition Page 1 of 14 C HAPTER H IGHLIGHTS It is extremely important in this chapter to make sure that definitions of concepts are well understood. The first important distinction is between simple and complex events. How relevant circumstances can affect complex events is the next link. Examples of the two types of relevant circumstances (present magnitudes and future contingencies) should help to reinforce the concept. With these various definitions and distinctions in mind, the two types of uniformity can then be examined. The point should be stressed that finite uniformity is not “better” than rigid uniformity. Which one would be preferable is very definitely a cost versus benefits question. Part of the cost of implementing finite uniformity would be a more extensive standard-setting apparatus than would be the case with rigid uniformity. Hence, finite versus rigid uniformity is very much a cost-benefits-oriented question. Finite and rigid uniformity, as total systems, represent ideal types. Nevertheless, a better understanding of current standards can be acquired if they are analyzed from the standpoint of finite and rigid uniformity. A third orientation, flexibility, is also present where several methods are allowed and no relevant circumstances are present. Since disclosure is becoming more important in light of increasing transaction (event) complexity as well as the impact of the efficient-markets hypothesis, and also has implications relative to the uniformity issue, it is examined in the last part of the chapter. The most important aspect of disclosure is the shift from protective to informative disclosure, which appears to be taking place at the SEC. While not much is said about the extensive growth of disclosure, it is certainly worthy of class discussion. The chapter contains an extensive discussion of disclosure and also lists and discusses different methods of disclosure. The difference between selective and differential disclosure is discussed as well as arguments in favor of more or less disclosure. Forms and methods of disclosure include management’s discussion and analyses, signalling and management earnings forecasts, segmental disclosures (the Jenkins Committee Report and SFAS No. 131), and quarterly information. Q UESTIONS Q-1 Is Cadenhead’s conception of circumstantial variables as the only permissible departure from prescribed accounting methods closer to finite or rigid uniformity? Cadenhead’s conception of circumstantial variables is more narrow in scope than the concept of relevant circumstances discussed in the chapter. Departures from the rigidly prescribed accounting methods are intended to be very infrequent. Therefore, though his approach falls be- tween finite and rigid uniformity, his intention is to be closer to rigid uniformity.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 9: Uniformity and Disclosure: Instructor’s Manu al Some Policy-Making Directions
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 14

IM_CH_09 - Chapter 9: Uniformity and Disclosure: Some...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online