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Abstract
Since the publication by this author of "Understanding Claims through UCC, FASB and GAAP" in early 2001, regulatory agencies have increased their attention to the worlds of intercompany trade and accounting. "Understanding Claims" proposed that accounting irregularities were widespread in mercantile trade, and that poor coordination between regulatory agencies and ineffective semantics and outdated bookkeeping conventions contributed to a breakdown in financial reporting.
Today, new accounting guidelines exist for the recognition of intangible expenses generated by sales promotion. The Financial Accounting Standards Board (FASB), through its Emerging Issues Task Force (EITF) has come to consensus regarding major issues of intercompany commerce. It is now clear that the malfunction of the stock market, historic corporate frauds, a decline in investor confidence, and massive wealth destruction have each contributed to better investigations into root causes and possible remedies. Accounting, long considered pristine and objective in its methods and purposes, suffered a staggering blow to its reputation. Central to today's reforms is the role of accounting and audit and how these influence the formation of financial reports.
FASB and The Securities and Exchange Commission (SEC) have responded by reforming audit controls and practices, and the public has responded by accepting that accounting processes have played a role in the breakdown of corporate governance that led to financial losses incurred by millions of shareholders and investors around the world.
The rise in value of trade promotion has led to a rise in the relevance of intangible expenses to inventory valuation and revenue recognition, resulting in a new blend of product and period costs that represents a new chapter in the history of financial reporting and accounting.
Introduction
The New Economy is characterized by many fundamental changes. Among these are:
The rise of intangible commerce
The decline of the cost of production and labor globally
The rise of the role of information
The advance of the Internet
The declining boundaries between companies
The breakdown of old accounting paradigms
The beginning of real-time supply chain information globally
These, among other developments, have pushed accounting close to the breaking point. Accounting, as a quantitative and categorical tool, has for centuries played a role in organizing information about changes in value over time, especially as these related to material things....