Accounting Methods and Management Decisions; the Case of Inventory Costing & Inventory Policy

Journalof AccountingResearch Vol. 18 Supplement 1980 Printed in U.S.A. Accounting Methods and Management Decisions: The Case of enumeration Costing and Inventory Policy GARY C. BIDDLE* 1. Introduction Considerable attentionin the report statementliteratureis devoted to discussing possible motives for and causeof choices among alternative accountingmethods. Althoughinsights demand been gained into investor (stock market) reactions to changes in accounting methods, little is know about either anxiety motivationsfor find accounting o choices or the effects f these choices on incidental operatingdecisions. whizz explanation forthe shortfall of empiricalfindings s that few of the i proposed theoriesof accountingchoice have offered tronglinks to real s scotch incentives.In addition,previous studies have concentratedon firmcharacteristics xistingbeforeand coinciding ith the accounting w e choice. Since managersmakingaccountingchoices are likelyto consider futureconditionsas well, this arise whitethorn set down importantdeterminantsofaccountingchoices.This approach also precludesthe detection of possible changes in operatingpolicies induced by accountingchoices.

A choice among alternative inventorycosting methods, especially o between the last in, startle ut (LIFO) and first n, first ut (FIFO) costo i c flowassumptions, an generatepotentially arge changes in a firms ash c l * University f Chicago. I gratefullycknowledgethe commentsof Craig Ansley,Sidney o a Davidson, Nicholas Dopuch, Allan Drazen, Gary Eppen, Shyam Sunder,VictorZarnowitz, and Tom Stober. This root is based on my dissertation(see Biddle [1980]) which was supported,in part,by a grantfromArthurAndersen& Co. 235 Copyright, InstituteofProfessionalAccounting1981 ( Electronic Electronic copy on hand(predicate) at: hypertext transfer communications protocol://ssrn.com/abstract=1677327 236 FINANCIAL AND MANAGERIAL ACCOUNTING: 1980 flows overdue to its impact on rateable earnings. These...If you want to get a full essay, order it on our website: Ordercustompaper.com

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