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The purpose of this paper is to investigate the effect of non-articulation on analyst earnings forecast quality. The authors look for evidence on the relationship between non-articulation and analyst earnings forecast properties: forecast inaccuracy, forecast dispersion and forecast bias.

The empirical tests are primarily based analyst earnings and cash flow forecasts covered by Institutional Broker Estimate System and financial statement information obtained from Compustat North America database.

The authors hypothesize and find that non-articulation is positively related to analyst forecast dispersion, forecast accuracy and forecast bias for one-year ahead of earnings. The effects of non-articulation on analyst earnings forecast inaccuracy and bias are neutralized when the analyst issues a cash flow forecast and when such forecast provides accurate information regarding the forecasted firm’s operating cash flow. On the other hand, cash flow forecast issuance alone does not mitigate the negative influence of non-articulation.

The sample selection procedure limits the generalizability of the findings.

The findings confirm CFA Institute and prior research asserting that non-articulation deteriorates the quality of earnings forecasts by financial statement users (more specifically, the financial analysts). The authors add to the literature by documenting that accurate cash flow forecasts help analysts mitigate the negative influence of non-articulation on earnings forecast quality.

It remains an empirical question whether non-articulation between the balance sheet and the statement of cash flows has an effect on financial statement users’ ability to assimilate financial information. The paper highlights the detrimental effect of non-articulation by documenting the relationship between the non-articulation and the quality of earnings expectation.

This instructional tool enhances coverage of statement of cash flows topics in graduate or upper division undergraduate accounting and finance courses.

We review one of the complexities of preparing the statement of cash flows. The exercise may include a discussion of the mechanics of preparation of the statement of cash flows using the indirect method. This discussion might include rationales behind operating section adjustments and highlight the pitfalls of using these adjustments without understanding their reasons. Preparation of a statement of cash flows may be followed by introducing the concept of nonarticulation and how it can cause the information presented in the statement to be misleading. To further understanding, the instructor may introduce the reconciliation worksheet provided. Finally, a current public company example, also provided, highlights the magnitude of nonarticulation in practice.

Students learn the complexities related to the preparation of the statement of cash flows. They are introduced to the concept of nonarticulation using an example of public company financial statements. Student feedback suggests appreciation for developing a deeper understanding of the statement of cash flows, learning why they are unable to replicate disclosed operating cash flow from balance sheets of publicly traded companies.

The coefficient of variation (CV) and coefficient of residual variation (CRV) have been used as measures of horizontal equity. Both, however, are noisy measures in that they overstate the amount of variation due to inequity in the tax system (Grasso & Frischmann 1992). The purpose of the current study, therefore, is to use the CRV of tax liability and provide an estimate of the portion of this CRV measure that is due to the tax system alone and that portion that is due to specification error. This precision is an improvement over the Grasso and Frischmann model. The first purpose is achieved by computing the difference between two CRV measures. The first CRV measure is derived from a regression of an expanded total income amount (ETI) on tax liability; the second CRV measure is from a regression of several explanatory variables on tax liability. To the extent that the more fully-specified regression captures the Internal Revenue Code provisions, the reduction in the CRV measure can be attributed to the tax system. A second purpose of this study is to estimate the extent to which the various types of tax code provisions cause this variation. The second purpose is achieved by an iterative process of omitting one explanatory variable from the full regression and determining the change in CRV due to this omitted variable.

The origins of the roof of the Great Hall at Alexandra Palace go back to Owen Jones' project for a ‘Palace of the People’ to be built at Muswell Hill, published in the Illustrated London News in 1860, as North London's answer to the Crystal Palace which had newly moved to Sydenham. This was not built, but in response to public request, when the Great Exhibition of 1862 was dismantled, a large section including one of the lateral domes was erected at Muswell Hill to form the first Alexandra Palace. This was done under the direction of the architects, Meeson & Johnson, who produced the water colour painting now held at the Palace illustrating the project viewed from the north (Photo A). The building consisted of a long nave running east‐west with three transepts, the largest in the centre being on the site of the present Great Hall with the crossing crowned by the mammoth dome raised higher than it had been at South Kensington by the introduction of an upper clerestorey level (Figure 1). The diameter of the dome was approximately 160 ft —larger than either the Pantheon (143 ft) or St Peter's (138 ft) in Rome.

The impact of paid tax return preparers on the horizontal equity (HE) of the federal tax system has significance for regulatory and tax policy reasons. Using multiple analytical techniques to consider data from the Statistics of Income Division's 2000 Individual Model File (IMF), this study shows that the HE measure is generally greater (implying less HE) for the paid-preparer returns than for the self-prepared returns, even after controlling for complexity and other variables that may differ systematically by tax preparation mode.

We conduct an experiment asking participants to choose to purchase either a traditional or hybrid car to examine how federal-state conformity of tax incentives impacts the decisions of taxpayers. We also examine perceptions of taxpayers surrounding federal-state conformity. Consistent with theory related to the effects of information environment and using an experiment in which taxpayers are asked to evaluate tax incentives related to a purchase decision between a traditional and hybrid car, we find that conformity is a significant factor in increasing the propensity to take advantage of the tax incentive. Specifically, we find that participants with simple and conforming federal-state incentives are more likely to take advantage of the tax incentive than with complex and conforming federal-state incentives. In addition, the effects of conformity between federal and state incentives suggest that participant perceptions of the federal system were heavily influenced by the actions of the state.

In this chapter, we present fragments of previously unpublished correspondence between Ludwig Lachmann and G. L. S. Shackle on the nature of institutions. This correspondence allows us to rationally reconstruct a theory of institutions, which extends Lachmann’s theoretical work. Shackle pointed out to Lachmann that institutions might be inputs into economic activities and that they themselves may be reproduced and transformed by these activities. Lachmann in turn contended that institutions consist of “instruments of interpretation.” We develop the concept of “instruments of interpretation” as a subset of institutions. These instruments are mental models and cognitive tools which are (1) inputs complementary to capital goods (2) jointly produced, reproduced, and transformed through economic activity. We suggest that in contrast to privately produced capital goods, parts of the institutional infrastructure are produced jointly as shared goods because the use of certain institutional elements is non-exclusive and non-subtractable; these elements – instruments of interpretation – are produced and reproduced by sharing and contributions through a process of joint production. This chapter explicitly connects two different but essential themes in Lachmann’s work: capital, and institutions. By combining these two strands of Lachmann’s work, we are able to demonstrate that there is a cross-complementarity between institutional orders and capital structures. This connection in turn provides a thicker understanding of the workings of markets.