For this article we were awarded the Lybrand Gold Medal, the highest honor in the Institute of Management Accountants 1995-1996 manuscript competition. Almost 300 manuscripts were submitted in the competition.

"Managing Risk With Derivatives" discusses both the risk environment in which businesses operate and the advantages of financial derivatives in hedging that risk. And, the article illustrates with specific examples the use of forward or futures contracts, options and swaps to eliminate financial risk. Each derivative security offers unique properties such as distinct payoff profiles, existence of organized exchanges, and the ability to cover a longer time horizon, making one better than another in a particular risk setting.

Derivatives enable a business to counterbalance existing interest rate, exchange rate and commodity price risks, thereby limiting potential losses and stabilizing cash flows. Moreover, derivatives offer speed, precision, flexibility and low transaction costs. Properly hedged risk can lead to lower borrowing costs, less volatility in net income, and increased firm value.

Nevertheless, risk reduction with derivatives can be costly. The examples demonstrate that the future may unfold in such a way that a company's cash flows would be superior if the hedging strategy had not been implemented. But, to criticize a hedging strategy retrospectively would be analogous to an individual finding fault with paying an insurance premium after the coverage period expired.

Finally, the process of managing risk with derivatives must itself be managed. Procedures must be developed and controls implemented to ensure the effective management of the market, credit and legal risks of derivative use. Establishing effective oversight by the board of directors, audit committees and senior management is paramount. With adequate controls the financial catastrophes due to financial derivatives during the past few years such as Metallgesellschaft, Proctor and Gamble, and Gibson Greetings might have been avoided.

Reprinted in Journal of Accounting Education, (Summer 1996).

This collection of commissioned essays from 15 prominent accounting educators encourages academics to extend their knowledge of the educational process through experimentation and dissemination of findings. In addition to providing a foundation for examining change, the authors challenge academics to explore, explain and share with colleagues their experiences with change. And, to facilitate improving the effectiveness of academic programs the authors present and discuss various research avenues to address the identification, design and implementation of structural, curricular and instructional change.

As chairman of the 1995 Federation of Schools of Accountancy's (FSA) Educational Research Committee, I invited, edited, published and distributed these essays to FSA member schools. And, to achieve a wider circulation I coordinated their reprinting in the Journal of Accounting Education.

Given the emphasis placed on research by deans and accounting department heads when making promotion and tenure decisions, this study examines the relative values assigned to specific scholarly accomplishments. We find that the relative values assigned differ in a manner consistent with the educational missions of the respondents' institutions. Subsequent recognition of academic publications through citations and reprints is valued more at doctoral-granting than nondoctoral-granting schools. However, no disparity was found among either deans or accounting heads in their valuation of publishing in an academic journal, the accomplishment held in the highest esteem by respondents from all institutional categories.

This collection of 21 recently published (1987-1992) essays promotes, describes and analyzes change in accounting education. The first four articles promote a change in perspectives on accounting education, with the lead article by Bedford and Shenkir describing the work and conclusions of the AAA's committee on the future structure, content and scope of accounting education. The four articles in the second section consider changing the industry of accounting education, including faculty performance evaluation, the accreditation process, and 150-hour curriculum innovation.

In the third section accounting program change is reviewed. Smith and Usry analyze the change that has occurred over the past 25 years to provide perspective. Mayer-Sommer proposes a curriculum modification which teaches students to learn how to learn. Mock et al. present a systems approach to accounting curriculum development. And, Baldwin and Ingram suggest that the elementary accounting courses be reconceptualized to attract high quality students who otherwise forsake accounting as a major.

The fourth section is comprised of nine articles which provide guidance in changing accounting instruction. Two articles deal with integrating ethics into the accounting curriculum, two with using the case method in accounting classes, two with teaching methods to improve writing and other social integration skills, and three with ways to enhance the realism of accounting classes.

This study examines the relative value of research, teaching, and service activities in promotion and tenure decisions of accounting faculty and identifies how these values vary across AACSB colleges of business and departments of accounting. Institutions are grouped based on their educational mission as measured by the Carnegie Foundation classification system.
The results demonstrate that the relative values assigned to research, teaching and service vary across deans and accounting department heads in a manner consistent with their institutions' educational mission. We find that the views of deans and accounting heads at doctoral-granting, high-research support schools differ from their counterparts at both doctoral-granting, low-research support schools and nondoctoral-granting schools. We conclude that for faculty performance studies the traditional classification of schools and programs based simply on doctoral-granting status may provide misleading or incomplete results. Future research studies in this area should utilize the Carnegie classification scheme.

This article reports the results of a survey of AACSB college of business department heads who evaluate business law faculty performance. Accounting department heads comprise ten percent of the respondents. The survey addresses the relative weights assigned to teaching, research, and service and the importance of various scholarly activities in promotion and tenure decisions. While confirming that research performance is most highly valued, the study reveals that research expectations differ depending on where business law faculty are housed within colleges of business. We find that the heads of separate business law departments place more emphasis on research than do their colleagues in accounting/ finance or management/marketing departments.

Based on the results of a survey of 1,000 companies having an IMA member, this article characterizes the accounting operations in small and medium-sized firms. Measures of the magnitude of controller budgets and the number of accounting personnel by function are provided for firms with up to $150 million in revenues. Surprisingly, we find that 40 percent of accounting personnel resources are consumed by financial management, marketing support, and MIS activities. Further, accounting operations in respondent firms are overwhelming devoted to custodial endeavors. Consequently, the opportunity to employ accounting personnel to improve the efficiency of overall operations is sacrificed.

Spreadsheets are particularly effective for assisting those making asset financing decisions, as they can accommodate many variables simultaneously. This article discusses the various financing alternatives and presents instructions for constructing a template using 1-2-3 to help accountants in advising clients making these decisions. The acquisition of office equipment provides the example. Variables considered include equipment cost and residual value, the borrowing rate and loan term, the lease term and monthly payment, the tax life of the property, and the tax rate of the prospective buyer.

Reprinted in the IEEE Engineering Review, (September 1990).

This article examines in detail the financing decision to lease or purchase. Based on information supplied by the Advanced Business Institute (IBM) and BankAmeriLease Company (Bank of America), we analyze using capital budgeting techniques four alternatives for financing a computer. The article describes how leasing really works with special attention paid to the impact of tax rules. Additionally, the effects of qualitative factors on the lease/purchase decision are presented. These attributes include the financial statement and financial ratio impact of the various financing alternatives, the flexibility which innovative lessors can provide, and the ability and value of managing financial risk.

This volume presents selected papers examining the various dimensions of faculty research. The introductory article examines the scope of scholarly activity, followed by six articles which investigate reasons for engaging in faculty research. Of particular interest are three articles which address the relationship between research and teaching. Then, given the importance placed on faculty research, a series of papers examines ways of enhancing publication levels. The book concludes with an article urging administrators to expand their definition of scholarly activity and to reward a combination of good research and teaching.

In January 1988 the AICPA's members approved overwhelmingly all six proposals constituting the Plan to Restructure Professional Standards." This lead article summarizes and discusses the potentially far-reaching impact of these proposals on the practice of public accounting.

This article provides an overview of the Treadway Commission's recommendations to the financial reporting community for reducing the incidence of fraudulent financial reporting. These recommendations are directed to management, the public accounting profession, the SEC and other regulators, as well as educators.

Economic Value Added (EVA), a tool to create wealth, enjoys widely publicized acceptance among large, publicly-traded corporations. Highly regarded companies like Coca-Cola and AT&T have seen their market value soar since adopting EVA. The concept is straightforward; earn more than the cost of capital. Thus, it is not surprising that EVA is the leading idea in corporate finance today. And, it is time for many small, privately-held firms to embrace this fundamentally sound financial idea to create firm value. This article demonstrates EVA's application in small, privately-held firms, examines EVA's strengths, weaknesses and ways to overcome those weaknesses, and describes specific operating, investment and financing actions available to small business managers which can create wealth.

The Federation of Schools of Accountancy's 1997 Educational Research Committee under my chairmanship took the first step in a process to develop more effectively the critical thinking skills of accounting graduates, identifying specifically the critical thinking competencies needed for success in public accounting. To help articulate employer expectations we obtained the performance appraisal documents, or portions of those documents, from 5 of the Big 6 firms. In addition to analyzing these documents, we conducted structured interviews with high-ranking human resource personnel from these firms. Our report summarizes the critical thinking competencies needed for success which came from these interviews.

This paper empirically examines the position that performance-contingent compensation plans are introduced to reduce agency costs arising from differences between the decision horizons of shareholders and managers. When ownership is separated from control and when bonus contracts are included in executive compensation packages, managers may overemphasize the short-term earnings effects of decision alternatives. Performance plans can alleviate this problem by rewarding the operating results of a three- to five-year period.
As hypothesized, the decision to adopt a performance plan is found to be negatively related to the level of managerial ownership and positively related to the inclusion of a short-term bonus scheme in the manager's compensation package. These findings are interpreted as supporting the motivation and incentive theory of compensation.

This paper examines whether introducing long-term incentive compensation plans induces managers to extend their decision horizons, as measured by increased levels of capital investment and research and development expenditures. As hypothesized, capital spending is shown to be positively related to the adoption of these plans. Moreover, the plans are found to be most effective when adopted by manager-controlled firms.