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Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the “Street.” Based on the facts of an actual company and utilizing the financial information drawn from this company's 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards, (2) about the potential role of non-GAAP earnings in this decision—especially as a predictor of future cash flows, and (3) other issues associated with non-GAAP earnings. This topic is important, as auditors are frequently auditing companies that release non-GAAP earnings and/or have going concern issues. This case can be used in Intermediate and Auditing classes, as well as master's-level courses.

Accounting programmes are being challenged (e.g. Albrecht and Sack, 2000) to make accounting curricula more relevant and to present assessment data regarding the efficacy of course and curricular offerings. In addition, assessment is embedded in current accreditation standards in the USA by the Association to Advance Collegiate Schools of Business (AACSB) International as fundamentally important to motivating continuous improvement (AACSB 2005). However, survey results in this area (viz., Kimmel et al., 1998, Issues in Accounting Education, 13(4), pp. 851–868 and Calderon et al., 2003, Best Practices in Accounting Program Assessment, Sarasota, FL: Teaching and Curriculum Section, American Accounting Association) indicate that assessment is not as widespread as might be expected. Further, Akers et al. (1997 Issues in Accounting Education, 12(2), pp. 259–280) note that the accounting education literature is limited with respect to descriptive accounts of assessment programme design and implementati...

A review of accounting textbooks indicates that most have not addressed the compelling arguments for including stock compensation plans in the calculation of compensation expense. This article relies on accounting theory to evaluate the recent FASB exposure draft dealing with stock-based compensation. Evaluating current coverage of ESOs in intermediate accounting texts supports the need for supplementary materials in this area that can be used as a teaching resource in accounting theory courses. This additional coverage, we argue, should include generating estimated values for ESOs and reinforcing the importance of statistical measures in valuation issues faced by accountants today. To enhance this understanding, a teaching pedagogy is developed which supports the measurement of economic value of ESOs reported in financial statements and attempts to articulate the need for a more theoretical discussion of these valuation issues in accounting theory classes.

Abstract The exclusive use of discounted cash flow (DCF) capital budgeting models is being criticized because of the inability of these models to handle qualitative/intangible benefits and tie the capital budgeting decision formally to organizational strategy. In response, several authors have recently proposed the use of Saaty's Analytic Hierarchy Process (AHP) for capital investment analysis. This paper extends that line of research by focusing on the fundamental problem of structuring the decision hierarchy appropriately so that the AHP can be implemented successfully in a capital budgeting context. Three approaches are presented for structuring AHP hierarchies, including the Mission, Objectives, and Strategy (MOS) framework for strategic planning. An example based on three actual companies in the petrochemical industry is developed using the MOS approach.

This article offers a decision support model for classroom coverage of capital budgeting. The model is operationalized through a decision-making framework known formally as the Analytic Hierarchy Process (AHP). This model offers two enhancements to traditional capital budgeting procedures. First, the AHP can link capital budgeting decisions directly to the strategic plan of the business unit. Second, it can incorporate nonfinancial (and subjective) factors formally and systematically into the decision framework. Depending on the depth of coverage desired, the proposed method can be used at both the graduate and advanced undergraduate levels in cost or managerial accounting courses.