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 showcase of document Costing and Inventory Policy GARY C. BIDDLE* 1. Introduction large attentionin the account statementliteratureis devoted to discussing possible motives for and effectsof choices among alternative method of accountingmethods. Althoughinsights develop been gained into investor (stock market) reactions to changes in accounting methods, little is known about either management motivationsfor come up accounting o choices or the effects f these choices on subsequent operatingdecisions. whizz explanation forthe dearth of empiricalfindings s that fewer of the i proposed theoriesof accountingchoice have offered tronglinks to real s scotch incentives.In addition,previous studies have concentratedon firmcharacteristics xistingbeforeand concurrent ith the accounting w e choice. Since managersmakingaccountingchoices are likelyto tip over futureconditionsas well, this approach may set down importantdeterminantsofaccountingchoices.This approach likewise precludesthe detection of possible changes in operatingpolicies induced by accountingchoices.

A choice among alternative inventorycosting methods, especially o between the die 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,VictorZarno witz, and Tom Stober. This topic is based ! on my dissertation(see Biddle [1980]) which was supported,in part,by a grantfromArthurAndersen& Co. 235 Copyright, InstituteofProfessionalAccounting1981 ( Electronic Electronic transcript available at: hypertext transfer protocol://ssrn.com/abstract=1677327 236 fiscal AND MANAGERIAL ACCOUNTING: 1980 flows due to its impact on ratable earnings. These...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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