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 study of document Costing and Inventory Policy GARY C. BIDDLE* 1. Introduction goodish attentionin the account statementliteratureis devoted to discussing possible motives for and effectsof choices among alternative bemethods. Althoughinsights come been gained into investor (stock market) reactions to changes in accounting methods, little is known about either management motivationsfor mystify accounting o choices or the effects f these choices on subsequent operatingdecisions. whizz explanation forthe dearth 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 concurrent ith the accounting w e choice. Since managersmakingaccountingchoices are likelyto cypher future conditionsas well, this approach may set down importantdeterminantsofaccountingchoices.This approach in addition precludesthe detection of possible changes in operatingpolicies induced by accountingchoices.

A choice among alternative inventorycosting methods, especially o between the abide 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 constitution is based on my disserta! tion(see Biddle [1980]) which was supported,in part,by a grantfromArthurAndersen& Co. 235 Copyright, InstituteofProfessionalAccounting1981 ( Electronic Electronic reproduction available at: hypertext transfer protocol://ssrn.com/abstract=1677327 236 pecuniary AND MANAGERIAL ACCOUNTING: 1980 flows due to its impact on nonexempt earnings. These...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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