![1-11
© 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
SOLUTION TO EXERCISE
E1-1
1. e 2. c 3. b 4. d 5. f 6. a 7. f
ANSWERS TO CASES
C1-1 [AICPA Adapted]
1. The term “accounting principles” in the auditor’s report includes not only accounting
principles but also concepts, practices, and the methods of applying them. The auditor's
report typically refers to “accounting principles” being applied by the firm being audited.
The independent auditor's attestation as to the fairness of a company's financial
statements relative to U.S. GAAP or IFRS is an essential element for the reliability of
financial statements.
2. Generally accepted accounting principles are those principles that have substantial
authoritative support. The SEC has deemed the FASB’s Accounting Standards
Codification as GAAP for U.S. companies. In addition, the SEC has deemed IFRS as
generally accepted accounting principles for non-U.S. companies that are listed in the
United States. The FASB and the IASB follow extensive, due processes to deliberate
and develop new accounting standards that, if adopted, become “generally
accepted.”
C1-2 [CMA Adapted]
Financial accounting standards inspire or encourage political action and social involvement
during the standard-setting process because the effects and economic consequences of
accounting standards are wide-ranging and impact many varying groups. The setting of
accounting standards is a social decision and the user groups play a significant role and have
considerable influence.
The economic consequences of financial accounting standards inspire companies,
stakeholders, and special interest groups to become vocal and critical when standards are
being formulated. The reporting of financial information impacts companies’ financial
statements and the wealth and decision-making of stakeholders in differing ways. Companies
and stakeholders may want particular economic events accounted for in particular ways and
are willing to fight for what they want.
The formulation of accounting standards has political roots in the Securities and Exchange Acts
of 1933 and 1934. Although the SEC was vested with complete authority to define and formulate
accounting standards, it has, for the most part, delegated this authority to the private sector.
The SEC supports the FASB in this endeavor and encourages its “due process” system of
standard setting. Financial accounting standards issued are considered to be “generally
accepted accounting principles” and, as such, they must be followed in the preparation of
financial statements. Therefore, the formulation of standards is of vital interest to companies
responsible for preparing the financial statements, stakeholders that use the statements, and
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- 5. 1-2 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. NUMBER TOPIC CONTENT LO ADAPTED DIFFICULTY TIME EST. AACSB AICPA BLOOM’S 1-13 Standard Setting Process for issuing accounting standard update 4 Easy 5 Analytic Measurement Comprehension 1-14 Standard Setting FASB; IASB 5 Easy 5 Analytic Measurement Analysis 1-15 Standard Setting Definition of IFRS 5 Easy 5 Analytic Measurement Application 1-16 Standard Setting Changing standards over time; U.S. GAAP; IFRS 5 Easy 5 Analytic Measurement Comprehension 1-17 Standard Setting The impact of pure theory vs. politics in standard setting 5 Easy 5 Analytic Measurement Analysis 1-18 Financial Statements Balance sheet; financial reporting stakeholders 6 Easy 5 Analytic Reporting Application 1-19 Financial Statements Income statement; financial reporting stakeholders 6 Easy 5 Analytic Reporting Application 1-20 Financial Statements Statement of cash flows; financial reporting stakeholders 6 Easy 5 Analytic Reporting Application 1-21 Financial Statements Statement of shareholders' equity; financial reporting stakeholders 6 Easy 5 Analytic Reporting Application 1-22 Financial Statements Purpose of footnotes; disclosure of financial information 6 Easy 5 Analytic Reporting Application 1-23 Earnings and the Stock Market Economic consequences of earnings information 7 Easy 5 Analytic Measurement Analysis 1-24 Ethics Ethics 7 Easy 5 Analytic Measurement Application 1-25 Ethics Ethics; code of professional conduct 7 Easy 5 Analytic Measurement Comprehension
- 6. 1-3 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. NUMBER TOPIC CONTENT LO ADAPTED DIFFICULTY TIME EST. AACSB AICPA BLOOM’S E1-1 Pronouncements FASB Accounting Standards Codification; different sources of GAAP 4 Easy 15 Analytic Measurement Comprehension C1-1 Accounting Principles Describe the meaning of the terms “accounting principles” and “generally accepted” 3 AICPA Easy 10 Analytic Measurement Application C1-2 Standard Setting Describe why there is political action and social involvement in the standard- setting process 3 CMA Easy 10 Analytic Measurement Application C1-3 Organization of the FASB Summarize the structure of the FASB and its operating procedures 3 Easy 15 Analytic Measurement Application C1-4 Code of Professional Conduct Identify, briefly discuss, and provide examples to illustrate the first five principles of CPC 7 Easy 10 Analytic Measurement Application C1-5 Lobbying the FASB Discuss pros and cons of lobbying the FASB by interested parties 3 Easy 5 Analytic Measurement Application C1-6 International Convergence Discuss convergence of U.S. GAAP and international accounting standards; include discussion of SEC and its role in this convergence; includes IFRS 5 Moderate 10 Analytic Measurement Application C1-7 Starbucks’s Financial Statements Identify two important pieces of information from each of the four primary financial statements and management discussion and analysis 6 Moderate 20 Analytic Reporting Application
- 7. 1-4 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. NUMBER TOPIC CONTENT LO ADAPTED DIFFICULTY TIME AACSB AICPA BLOOM’S EST. C1-8 Nestlé’s Financial Identify two important pieces of information from each of three primary financial statements 6 Moderate 20 Analytic Reporting Application Statements C1-9 Coca Cola's Financial Statements Identify two important pieces of information from each of three primary financial statements 6 Moderate 20 Analytic Reporting Application C1-10 Ethical Responsibilities Discuss steps to take in an ethical dilemma (“misplaced” book in library) 7 Moderate 5 Reflective Measurement Analysis Thinking C1-11 Ethical Responsibilities Discuss steps to take in an ethical dilemma (cheating by friend on exam) 7 Moderate 5 Reflective Measurement Analysis Thinking C1-12 Codification Prepare a memo to explain and demonstrate the Codification to an introductory accounting student, who is familiar with the financial statements and accounts Moderate 25 Analytic Measurement Application C1-13 Codification Search the Codification to determine how a company should account for the cost of a new desktop computer for use in the office Moderate 15 Analytic Measurement Application C1-14 Codification Search the Codification to determine how a company should account for recognition of retail revenues with the right to return Moderate 25 Analytic Measurement Application
- 8. 1-5 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWERS TO GOT IT? 1-1 The role of financial accounting is to identify, measure, record, and report relevant and reliable financial information about companies to present and potential future stakeholders. Financial reporting is the process of communicating financial accounting information about a company to existing and potential future investors, creditors, and other external decision makers and stakeholders. An important way a company’s financial accounting information is reported is in its quarterly and annual reports. The role of financial reporting is to inform investors, creditors, and other stakeholders. Financial reporting also provides information to mitigate agency problems which stem from the separation of ownership and control of resources. 1-2 The primary stakeholders that are important users of financial information include investors, creditors, banks, suppliers, customers, employees, executives, labor unions, pension funds, government regulatory authorities, tax authorities, local communities, and many others (see Exhibit 1.1). The instructor can discuss how these stakeholders can be divided into two major categories: external users and internal users. These two groups do not have the same decision-making information needs because of their differing relationships with the company providing economic information. Of these groups, FASB has stated the primary purpose of financial reporting is to inform investors and creditors. 1-3 Investors and creditors take different risks and enjoy different potential upside gains from investing or lending. Equity investors are the residual risk bearers of corporations, but stand to enjoy potentially greater upside if the company is successful and profitable. Creditors face less risk of loss of their investments because they have superior claim in bankruptcy over equity investors. But creditors do not share in the same upside potential as equity investors. As a result of these differences, their information needs differ. Equity investors are more concerned with profitability, whereas creditors tend to be more focused on cash flows. 1-4 Information asymmetry arises from the separation of ownership and control of resources. Financial reporting helps reduce (but not eliminate) information asymmetry problems by enabling managers (agents) to provide relevant and faithfully represented information to investors and creditors (principals), thereby reducing information asymmetry. 1-5 The demand for financial accounting information, as an economic good in society, arises from the needs of equity shareholders, creditors, and various other stakeholders for information to make resource allocation decisions. This demand arises because businesses have to compete for and attract scarce economic resources, such as equity and debt capital, productive resources, employees, supplier and customer relationships, and so forth. In order to compete for these valuable resources, companies must provide relevant and faithfully represented information to those who can provide the resources.
- 9. 1-6 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-6 To solve the problems that would arise from biases in a self-reporting accounting system, a natural demand arises for accounting standards and audits. The demand for accounting information drives the demand for professionally established accounting standards that provide authoritative guidance on how to measure and report economic activities in financial statements. In addition, the demand for accounting information also drives the demand for auditing—independent verification and attestation of whether the financial statements have been fairly presented in accordance with professional accounting standards. 1-7 Generally Accepted Accounting Principles (GAAP) are the principles, concepts, guidelines, procedures, and practices that U.S. companies that are listed in the United States and subject to SEC regulation are required to use in recording and reporting the accounting information in audited financial statements. 1-8 The supply of accounting information that companies report to external stakeholders is determined primarily by the interactions between two sets of forces: • The authoritative professional accounting standards that govern in the company’s country of incorporation, such as U.S. GAAP or IFRS, and • the many choices, methods, estimates, and judgments that the company must make in order to apply those accounting standards to measure and report their financial statements. 1-9 The stated mission of the U.S. Securities and Exchange Commission is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The U.S. Congress created the SEC to administer the Securities Act of 1933 and the Securities Exchange Act of 1934. Under these Acts, the SEC has the legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets. The SEC has mandated that the information communicated to external users in financial reporting must be based on professionally established accounting principles, such as GAAP for U.S companies and IFRS for non-U.S. companies. The SEC delegates the authority over standard setting to private standard-setting bodies within the accounting profession, such as the Financial Accounting Standards Board (FASB) establishing GAAP for U.S. companies and the International Accounting Standards Board (IASB) establishing IFRS for companies from many other countries around the world. The SEC monitors closely and oversees the standards being developed by these standard setters. From time to time, the SEC exerts pressure on the standard setters to adopt, or not adopt, specific standards. 1-10 The FASB is responsible for identifying financial accounting issues, conducting research to address these issues, and resolving them by issuing new accounting standards applicable to U.S. companies. The FASB fulfills its responsibility by: • establishing standards that are the most acceptable, given the various affected constituencies, and • continually monitoring the consequences of its actions so that revised standards can be issued where appropriate.
- 10. 1-7 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-11 In assisting the FASB, the primary objectives of the EITF are: • to identify significant emerging accounting issues (i.e., unique transactions and accounting problems) that it feels the FASB should address. • to develop consensus positions on the implementation issues involving the application of standards. In some cases, these consensus positions may be viewed as the ‘‘best available guidance’’ on GAAP, particularly as they relate to new accounting issues. 1-12 The Codification is an electronic database that integrates and topically organizes the U.S. GAAP into one coherent body of literature. There are six levels in the framework of Codification: Areas, Topics, Subtopics, Sections, Subsections, and Paragraphs. The Topics level contains a collection of related guidance on a particular subject Area. The Subtopics level includes subsets of a Topic. The Sections level characterizes the nature of the content in a Subtopic (e.g., Recognition, Measurement, Disclosure). The Subsections level provides finer breakdown of the content in a Section. Paragraphs contain the guidance that constitutes GAAP. The FASB issued six types of pronouncements prior to the Codification: 1. Statements of Financial Accounting Standards. These pronouncements established GAAP. They indicated the methods and procedures required on specific accounting issues. 2. Interpretations. These pronouncements provided clarifications of conflicting or unclear issues relating to previously issued FASB Statements of Financial Accounting Standards, APB Opinions, or Accounting Research Bulletins. 3. Staff Positions. The staff of the FASB issued these pronouncements to provide more timely and consistent application guidance in regard to FASB literature, as well as to make narrow and limited revisions of GAAP. 4. Technical Bulletins. The staff of the FASB issued these pronouncements to clarify, explain, and elaborate on accounting and reporting issues related to Statements of Standards or Interpretations. 5. Statements of Financial Accounting Concepts. These pronouncements established a theoretical foundation upon which to base GAAP. They are the output of the FASB’s “conceptual framework” project. 6. Other Pronouncements. On a major topic, the staff of the FASB may have issued a Guide for Implementation. The Codification did not change GAAP per se, in that it did not issue or rescind any standards. Instead, the FASB developed the Codification to achieve three goals: • Simplify user access by codifying all authoritative U.S. GAAP in one spot. • Ensure the codified content accurately represented all authoritative U.S. GAAP. • Create a codification research system that is up to date, including the most recently released standards.
- 11. 1-8 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-13 Before issuing an Accounting Standards Update, the FASB generally completes a multistage process as follows: (1) identifies topic (2) appoints task force (3) conducts research (4) issues Discussion Memorandum or Invitation to Comment (5) holds public hearings (6) deliberates on findings (7) issues Exposure Draft (8) holds public hearings (9) modifies Exposure Draft (10) votes After a super-majority vote (five votes out of seven) is attained, the FASB issues an Accounting Standards Update. 1-14 The FASB and IASB are structured very similarly, in organizations that are overseen and supported by Boards of Trustees, and supported by large staffs of professional and technical experts and administrative support. Both Boards follow similar open, careful due processes in deliberating new accounting standards. Whereas the FASB is a seven-member Board consisting of only U.S. members, the IASB is larger, with 16 full- time members. The composition of the IASB is structured to contain representation from different countries and regions of the world. The IASB issues International Financial Reporting Standards (IFRS). To do so, its operating procedures include study of the topic, issuance of an Exposure Draft, evaluation of comments, and consideration of a revised draft. If approved by at least nine members of the IASB, the International Financial Reporting Standard is issued. 1-15 They are the principles, concepts, guidelines, procedures, and practices that companies from the roughly 130 countries that have adopted IFRS are required to use in recording and reporting the accounting information in audited financial statements. In the United States, the SEC has decided to allow non-U.S. companies that are listed in the United States and subject to SEC regulation to use IFRS for preparation of financial statements filed with the SEC. 1-16 The FASB and the IASB have worked together toward convergence since the “Norwalk Agreement” in 2002. At that time, the two Boards entered into this agreement to work together on the development of high-quality, compatible accounting standards that could be used for both “domestic” and “cross-border” financial reporting. The Boards in 2009 and 2010 identified a number of major projects they undertook jointly. The Boards have completed most of these major projects. These joint projects have helped achieve greater convergence in accounting standard for revenue recognition (issued 2014), consolidated financial statements (issued 2011), fair value measurement (issued 2011), and financial statement presentation (amendments to reporting comprehensive income completed in 2011; other joint work discontinued).
- 12. 1-9 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-17 Because of the substantial economic consequences of new standards, key constituents often disagree about the objectives for new standards. Because the Boards hold public hearings and open meetings, various external user groups (e.g., investors and creditors) and other interested parties (e.g., affected corporations and CPA firms) exert pressure to influence the new standards, continue existing standards, or change existing standards in their own best interests. In addition, research results about the likely effects of new standards are sometimes conflicting, and only “best guesses” can be made of the future consequences of current standards. A particular difficulty is that costs of complying with new standards are often significant and measurable, whereas the benefits of new information to decision makers are diffuse and hard to quantify. As a consequence, the FASB and the IASB often make decisions about new accounting standards that sometimes require compromise between conflicting views and interests. 1-18 The balance sheet, or statement of financial position, presents a snapshot of the resources of a firm (assets) and the claims on the company (liabilities and shareholders’ equity) as of a specific date (usually the last day of the fiscal quarter or the fiscal year). The balance sheet reports the following equality: Assets = Liabilities + Shareholders’ Equity Most stakeholders in a company, particularly investors and creditors, will be interested in balance sheet information because it reports the financial position (resources and obligations) of the company. 1-19 The income statement measures and reports the financial results of a firm’s performance for a period of time, usually a quarter or a year. The income statement provides information about the profits (or losses) the firm has generated during the period by conducting operating, investing, and financing activities. Most stakeholders in a company, particularly equity investors, will be interested in income statement information because it reports the profits and losses that accrue to the common equity shareholders of the company. The chapter shows empirical research evidence on how changes in earnings are associated with changes in stock prices. 1-20 The statement of cash flows reports for a period of time the net cash flows (inflows minus outflows) from the three principal categories of business activities: operating, investing, and financing. The purpose of the statement of cash flows is important but simple: to provide useful information about how a firm is generating and using cash. The statement of cash flows provides information to complement the income statement, demonstrating how cash flows differ from accrual-based income. Cash flow information is very helpful to financial statement users who want to gauge how the firm is executing its strategy. The statement is particularly useful to creditors and other stakeholders with claims on future cash flows of a firm. The statement of cash flows helps them evaluate the firm’s cash-generating ability, giving them information about the likelihood of future cash flows for future payments of their obligations.
- 13. 1-10 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1-21 The statement of shareholders’ equity (sometimes called the statement of changes in shareholders’ equity) provides information about the common shareholders’ equity claims on the company, and how those claims changed during the period. The year- end amounts reported in this statement for the various common shareholders’ equity accounts will match the amounts reported in the shareholders’ equity section of the balance sheet. Equity investors will be particularly interested in the information in this statement. 1-22 A firm’s accounting system records the results of transactions, events, and commercial arrangements and generates the financial statements, but the financial statements do not stand alone. To provide more relevant and representationally faithful information for financial statement users, firms typically provide a substantial amount of important additional information with the financial statements, including the Notes, Management Discussion and Analysis, and Managers’ and Independent Auditors’ Attestations. The notes to the statements explain the methods, assumptions, and estimates the firm has used in measuring and reporting the accounting information in the financial statements. 1-23 To illustrate the striking links between accounting earnings and stock returns, the chapter provides a brief discussion of the results from empirical research by D. Craig Nichols and James Wahlen. They studied the average cumulative market-adjusted stock returns generated by firms during the 12 months leading up to and including the month in which each firm announced annual earnings numbers. For a sample of 31,923 firm-years between 1988 and 2001, they found that the average firm that announced an increase in earnings (over the prior year’s earnings) experienced stock returns that beat market average returns by roughly 19.2 percent. On the other hand, the average firm that announced a decrease in earnings experienced stock returns that were roughly 16.4 percent lower than the market average. Their results suggest that merely the sign of the change in earnings was associated with a 35.6 percent stock return differential in one year, on average, over their sample period. The results show that earnings information has important economic consequences, because changes in earnings are strongly associated with significant changes in share prices. 1-24 As accountants, we create valuable financial information that stakeholders use to make informed resource allocation decisions about companies. Accounting information triggers substantial economic consequences for a wide array of different stakeholders in a company. Because accounting information has such important consequences for so many different stakeholders, being an accountant requires the ability to bear this great responsibility while behaving ethically. 1-25 The Code of Professional Conduct is a document published by the AICPA to help guide members in public practice, industry, government, and education in performing their responsibilities in an ethical and professional manner. The six areas covered by the Principles include: (1) responsibilities, (2) public interest, (3) integrity, (4) objectivity and independence, (5) due care, and (6) scope and nature of services.
- 14. 1-11 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SOLUTION TO EXERCISE E1-1 1. e 2. c 3. b 4. d 5. f 6. a 7. f ANSWERS TO CASES C1-1 [AICPA Adapted] 1. The term “accounting principles” in the auditor’s report includes not only accounting principles but also concepts, practices, and the methods of applying them. The auditor's report typically refers to “accounting principles” being applied by the firm being audited. The independent auditor's attestation as to the fairness of a company's financial statements relative to U.S. GAAP or IFRS is an essential element for the reliability of financial statements. 2. Generally accepted accounting principles are those principles that have substantial authoritative support. The SEC has deemed the FASB’s Accounting Standards Codification as GAAP for U.S. companies. In addition, the SEC has deemed IFRS as generally accepted accounting principles for non-U.S. companies that are listed in the United States. The FASB and the IASB follow extensive, due processes to deliberate and develop new accounting standards that, if adopted, become “generally accepted.” C1-2 [CMA Adapted] Financial accounting standards inspire or encourage political action and social involvement during the standard-setting process because the effects and economic consequences of accounting standards are wide-ranging and impact many varying groups. The setting of accounting standards is a social decision and the user groups play a significant role and have considerable influence. The economic consequences of financial accounting standards inspire companies, stakeholders, and special interest groups to become vocal and critical when standards are being formulated. The reporting of financial information impacts companies’ financial statements and the wealth and decision-making of stakeholders in differing ways. Companies and stakeholders may want particular economic events accounted for in particular ways and are willing to fight for what they want. The formulation of accounting standards has political roots in the Securities and Exchange Acts of 1933 and 1934. Although the SEC was vested with complete authority to define and formulate accounting standards, it has, for the most part, delegated this authority to the private sector. The SEC supports the FASB in this endeavor and encourages its “due process” system of standard setting. Financial accounting standards issued are considered to be “generally accepted accounting principles” and, as such, they must be followed in the preparation of financial statements. Therefore, the formulation of standards is of vital interest to companies responsible for preparing the financial statements, stakeholders that use the statements, and auditors.
- 15. 1-12 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C1-3 The Financial Accounting Foundation is the parent organization of the FASB. It is governed by a 14- to 18-member Board of Trustees appointed from the memberships of eight organizations (the AICPA, Financial Executives Institute, Institute of Management Accountants, CFA Institute, American Accounting Association, Securities Industry and Financial Markets Association, Government Finance Officers Association, and National Association of State Auditors, Comptrollers, and Treasurers) interested in the formulation of accounting principles. The primary responsibilities of the Financial Accounting Foundation are to provide general oversight to its operations and appoint the members of the Financial Accounting Standards Advisory Council (FASAC) and the FASB. The FASAC consists of about 33 members; it is responsible for advising the FASB about major policy issues, the priority of topics, the selection of task forces, the suitability of tentative decisions, and other matters. There are seven members of the FASB. Appointees to the FASB are full-time, fully paid members with no other organizational ties and are selected to represent a wide cross-section of interests. Each Board member is required to have a knowledge of, and experience in, accounting, finance, investing, business, and accounting education and research; high intelligence, integrity, and discipline; and a concern for the public interest regarding investing, financial accounting, and financial reporting. The FASB is responsible for identifying financial accounting issues, conducting research to address these issues, and resolving them. The FASB is supported by a research and technical staff that performs numerous functions such as researching issues, communicating with constituents, and drafting preliminary findings. The administrative staff assists the FASB by handling library, publications, personnel, and other activities. Operating Procedures and Pronouncements. Before issuing an accounting standards update, the FASB generally completes a multistage process, although the sequence and numbers of steps may vary. Initially, a topic or project is identified and placed on the FASB’s agenda. This topic may be the result of suggestions from the FASAC, the accounting profession, industry, or other interested parties. On major issues, a Task Force may be appointed to advise and consult with the FASB’s Research and Technical Staff on such matters as the scope of the project and the nature and extent of additional research. The Staff then conducts any research specifically related to the project. A Preliminary Views document or Invitation to Comment, which outlines the research related to the issues, is then usually published and a public comment period is set. During this period, public hearings, similar to those conducted by Congress, may be held. The intent is to receive information from and views of interested individuals and organizations on the issues. Many parties submit written comments (“position papers”) or make oral presentations. These parties include representatives of CPA firms and interested corporations, security analysts, members of professional accounting associations, and academicians, to name a few. After deliberating on the views expressed and information collected, the FASB issues an Exposure Draft of the proposed Accounting Standards Update. Interested parties generally have 30–90 days to provide written comments of reaction. On major issues, more public hearings may be held. Sometimes, a “field test” of the proposed standard is conducted with selected companies to evaluate implementation issues. A modified draft is prepared, if necessary, and brought to the FASB for a final vote. After a super-majority vote (at least five of seven votes in favor) is attained, the FASB Accounting Standards Update is issued.
- 16. 1-13 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C1-4 The first five principles of the AICPA’s Code of Professional Conduct are as follows: 1. Responsibilities: In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. For example, when a member chooses a depreciation method, she must carefully analyze each alternative based upon well-defined criteria before making a final choice. 2. The Public Interest: Members should act in a way that will serve the public interest, honor the public trust, and demonstrate a commitment to professionalism. When a member refuses to ignore internal control deficiencies in a company with publicly traded stock, but instead enumerates these deficiencies in the Auditor’s report, she is adhering to the public interest principle. 3. Integrity: To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity. For example, a member who carefully and conscientiously performs each step of an audit without skipping those steps that are tedious or of less interest is exercising the integrity principle. 4. Objectivity and Independence: A member should be objective and be free from conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services. For example, a member who declines to audit the financial statements of the company for which his father is a marketing vice president is adhering to this principle. 5. Due Care: A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability. When a member reads current accounting literature and strives to employ current principles and procedures, she is exercising due care. C1-5 On balance, most people would agree that it is a good idea for the FASB to allow written comments and oral presentations in which interested parties can lobby for a particular ruling. However, there are both pros and cons to allowing interested parties to provide input to its deliberation process. They include: Advantages • Enables FASB to get input from different perspectives • Provides users a forum to express concerns • Provides preparers a forum to express concerns • Provides auditors a forum to express concerns • Overcomes criticism of failing to listen to constituencies • Allows for consideration of views of all interested parties • Rulings appear more fair to all constituencies
- 17. 1-14 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C1-5 (concluded) • Rulings consider the costs and benefits of implementation • Standards are established that are the most acceptable • Allows for clarification of rules • Allows for corrections of any errors • Allows for consideration of implementation issues Disadvantages • Rulings sometimes appear to be biased in favor of certain user groups • Rulings sometimes are inconsistent with other Statements of Standards • Rulings sometimes are inconsistent with Statements of Concepts • Rulings sometimes appear illogical • FASB is too slow in establishing standards • Standards are too complex and difficult to implement C1-6 Currently, U.S. corporations are subject to the accounting standards (called U.S. GAAP) established by the FASB, while foreign corporations are subject to international standards called IFRS (international financial reporting standards) established by the International Accounting Standards Board (IASB) or by their national accounting standards boards. These differences in accounting standards have led to differences among U.S. and foreign corporations’ financial statements. These differences, in turn, have made it difficult for investors and creditors to make valid comparisons across corporations and to make effective buy-sell-hold decisions in the U.S. and foreign capital markets. To overcome this problem, the FASB and the IASB have been working together toward convergence since the “Norwalk Agreement” in 2002. At that time, the two Boards entered into this agreement to work together on the development of high-quality, compatible accounting standards that could be used for both “domestic” and “cross-border” financial reporting. To achieve this compatibility, the Boards agreed to work together to achieve “short-term” convergence on a number of individual differences between U.S. and international accounting standards. They also agreed to coordinate their future agendas on substantial long-term projects which both Boards would address concurrently. Finally, they agreed to continue working on joint projects they were currently undertaking. This overall collaboration is sometimes referred to as the convergence or harmonization of accounting standards. The Boards in 2009 and 2010 identified a number of major joint projects to undertake jointly, as well as short-term projects (in which convergence can occur fairly quickly). The Boards have completed most of their joint efforts to complete these major projects. The major projects the Boards have completed have achieved great convergence in accounting standards for: • Consolidated financial statements • Fair value measurement • Financial statement presentation • Revenue recognition
- 18. 1-15 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C1-6 (continued) Moving forward, the FASB will continue to work on global accounting issues with the IASB through its membership in the Accounting Standards Advisory Forum (ASAF), a newly established advisory body comprising twelve standard setters from across the globe. Both Boards also provide quarterly progress reports which can be downloaded from their web sites. The SEC has moved forward on two fronts: (1) changing its filing regulations for foreign companies and (2) considering changing its filing requirements for U.S. companies. In the past, a foreign company filing its financial statements with the SEC that used accounting standards other than U.S. GAAP had to file a form which “reconciled” certain amounts reported in its financial statements with the amounts that would have been reported using U.S. GAAP. However, in late 2007 the SEC rescinded this rule for foreign companies that use English- language IFRS (with no exceptions) to prepare their financial statements. These companies no longer have to file a reconciliation. In July 2012, the SEC staff issued its final report considering incorporating IFRS into the financial reporting system for U.S. companies. The report was the final phase of a work plan, initiated in February 2010, to consider specific issues relevant to the SEC’s determination as to where, when, and how the current financial reporting system for U.S. issuers should be transitioned to a system incorporating IFRS. The 2012 report summarized the staff’s findings regarding key issues surrounding the potential incorporation of IFRS into U.S. financial reporting, but did not make any recommendation to the Commission. “Additional analysis and consideration of this threshold policy question is necessary before any decision by the Commission concerning the incorporation of IFRS into the financial reporting system for the U.S. issuers can occur,” the report said. In the report, the staff identified a number of unresolved issues relating to the potential incorporation of IFRS into the U.S. financial reporting system. These issues include the diversity in how IFRS are interpreted, applied, and enforced in various jurisdictions around the world; the potential cost to U.S. issuers of adopting or incorporating IFRS; investor education; and governance. The movement by more foreign companies to using IFRS has created two potential problems for U.S. companies using U.S. GAAP (“regulated companies”) and that operate globally. First, their financial statements are likely to be different from those of the foreign companies with which they are competing for capital, creating difficulties for investors in comparing companies. Second, if they have subsidiaries operating in foreign countries, they may be required to prepare their subsidiaries’ financial statements according to IFRS for local filings. Since they still have to prepare their financial statements using U.S. GAAP to file with the SEC, this creates potential costly inefficiencies. As a result, the SEC has begun a study of whether it should require or allow U.S. companies to use IFRS in their financial statements filed with the SEC. There are many issues related to this possible change, and they are very complex and far reaching. These include: (1) Many U.S. companies (particularly smaller ones) filing with the SEC do not operate globally so they would not see any advantage to using IFRS. If IFRS were required, it would likely be very costly for them to switch from U.S. GAAP to IFRS, thereby affecting their profitability during the conversion period.
- 19. 1-16 © 2020 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. C1-6 (concluded) (2) The vast majority of U.S. corporations do not issue publicly traded securities and therefore are not regulated by the SEC. These corporations use U.S. GAAP in preparing their financial statements. A switch to IFRS for regulated U.S. companies would create a “dual- GAAP” system in the United States. (3) Investors, creditors, financial analysts, and other external users would have to retrain to be able to evaluate the financial statements of companies using IFRS. Also, those external users who have more resources to learn about analyses under IFRS may be at a competitive advantage. (4) Accountants and auditors would have to be trained and/or retrained to understand the impact of IFRS on the preparation of financial statements and the related audits of companies using IFRS. Larger auditing firms with more resources for training may be at a competitive advantage over smaller auditing firms. (5) Many companies that have borrowed money have “debt covenants” based on U.S. GAAP that restrict their financing activities. Modifications in existing IFRS may have to be made to maintain (or modify) these debt covenants. (6) Some accounting issues (e.g., related to extractive industries) are not covered by IFRS. New high-quality IFRS would have to be established to address these issues. C1-7 Note to Instructor: This is an open-ended case question intended to get students reading and thinking about interesting information in each of the financial statements for Starbucks. Because of its open-ended nature, we take an open-minded approach to the answers students might offer. We are willing to accept any reasonable answers regarding what students consider to be interesting information, so long as the information is drawn from the appropriate statement and is explained in an appropriate manner. Some simple examples for each statement follow. Balance Sheet: • Enormous holdings of cash and cash equivalents, $2,462.3 million. • Large amount of inventory, $1,364.0 million. • Jump in property, plant, and equipment, from $4,533.8 million to $4,919.5 million. • Decrease in goodwill, from $1,719.6 million to $1,539.2. • Significant increase in long-term debt financing—from $3,185.3 million to $3,932.6 million. • Total equity ($5,457.0 million) comprises just under 38% of the liabilities and equity, $14,365.6 million. • The majority of equity arises from retained earnings, which amounts to $5,563.2. Students may note that retained earnings actually exceeded total shareholders' equity, in part because of the accumulated other comprehensive loss of $155.6 million.
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- 21. MICROSCOPIC AND MACROSCOPIC APPEARANCES. Bacilli are found in all the internal organs, notably in the spleen, in blood and in the enlarged glands. Body does not show much emaciation; decomposition commences early. Black hæmorrhagic patches are often found on the skin. The brain and membranes are congested. Sanguinous or serous effusions are found in serous cavities. Right side of the heart is dilated and is usually found full of coagulated or liquid blood. Cardiac muscles pale. The liver is enlarged and congested. The spleen is much enlarged, soft and congested. Hæmorrhagic patches have been found in the stomach. The mesenteric glands are enlarged. Kidneys congested. Bladder is sometimes found filled with bloody urine. The buboes are sometimes found to be soft and caseous. The tissues surrounding them are infiltrated with a reddish gelatinous exudation. The whole lymphatic chain from groin to the glands of the sacral or lumbar plexus, or from the axilla and neck to the glands of the mediastinum are affected. The internal glands are found more or less enlarged, injected and infiltrated with sanguineous fluid. The lymphatic follicles and Peyer’s patches in the intestines are found swollen. Hæmorrhages are found in the mesentery.
- 22. 25 PREVENTION.— It is evident from what has been said that to prevent plague our efforts should be directed in two ways:—(1) To prevent the importation of germs; (2) to make the environment of a place such that the germs, even if imported, may not find suitable condition for their growth. To accomplish the first we need (a) inspection of people coming from infected places; (b) stopping importation of such articles as may carry infection with them; (c) quarantine, a word which owes its origin to the fact that, daring the epidemic of plague at Milan in 1527, patients when cured were despatched to lazarettos and detained there 40 days. For the second, we require (a) sanitary precautions by guardians of public health; (b) observance of rules of personal hygiene by which good health can be maintained. (1). Wherever possible a medical inspection should be made to prevent importation of the disease. This is, however, a very difficult matter, and one unforeseen difficulty was experienced at Sukkur, where it was found that people booked to stations short of Sukkur, and rebooked at stations on the other side. Still this measure is highly important, and should be carried out most rigorously as long as there is any chance of importation of plague into an unaffected country. It is needless to feel the pulse of the patient; his gait, temperature, and look would afford a great deal of information. Information should be obtained from where the patient is travelling. An examination should also be made of clothes. Dirty clothes, soiled linen and rags should not be allowed to pass through an inspection post. (2). There should be a disinfecting or sterilizing room fitted with a steam sterilizer in all large railway stations, where all goods should
- 23. 26 27 be disinfected. Mail bags should also be subjected to this disinfection. Transmission of such goods as corpses, used clothes, rags, waste paper, fur, hide, feather, and fish should be entirely suspended. (3). If quarantine is imposed, it should be for a period not less than ten days. Every arrangement, however, should be made for suitable accommodation and sanitation in quarantine camps. In a quarantine camp new arrivals should not be mixed up with those who are already in quarantine. (4). Ships from infected ports should be carefully watched. If any infection is discovered, then isolation of the sick, disinfection of the ship and quarantine are required, but ships with clean bills of health, and if ten days have passed since its departure from the infected port, may be admitted after medical inspection. It must, however, be borne in mind that rats could easily carry infection from one port to another without any fear of detection. These facts show that medical inspection and quarantine may be useful, but they can never be perfect, and therefore the principal safeguard of a place lies in the improvement of its sanitation, and therefore greater attention and energy should be directed towards it. Sanitary Measures that should be taken by Municipal and Railway authorities. (1). All filth should be removed from the vicinity of towns and villages and burnt, and no filth of any kind should be allowed to remain within an inhabited area for any length of time. (2). All private and public latrines and public urinals should be cleaned and disinfected daily. All receptacles used for night-soil either in the latrine or for transport should be daily disinfected. (3). Latrine accommodation, according to the requirements of the population, should be provided.
- 24. 28 (4). Drains should be well washed and flushed with a disinfectant solution. In towns where there is an underground sewer, it should be well flushed and ventilated, and a disinfectant solution used for cleaning it. A house-to-house examination should be made to ascertain that all house-connections are properly and efficiently trapped. Deposits in the sewer should be taken out and suitably disposed off after disinfection. (5). Special attention for cleansing should be given to the following: — Cesspools, privies, cow-houses, stables, slaughterhouses, markets, workshops, common lodging houses, serais, bustees, and crowded quarters of a town. (6). All public roads should in the dry season be watered with a weak disinfectant solution. (7). Pure drinking water should be supplied. All articles of food should be inspected. Musty and decomposing grains should not be allowed to be sold. The meat market, dairies and bakeries should be under strict sanitary supervision. (8). Over-crowding in houses should be prevented. Steps should be taken for spreading out the population of much over-crowded and congested parts of towns. (9). Lime in a dry state and in solution should be abundantly used in drains, &c. (10). All railway carriages travelling through infected areas should be daily washed with a reliable disinfectant solution, such as 5 per cent. carbolic acid. (11). Railway platforms, waiting rooms and halls, and latrines should be frequently cleaned and disinfected.
- 25. 29 (12). There should be a system of house-to-house inspection to ascertain the sanitary condition of dwelling-houses, and also to find out, as far as possible, the condition of health of the inmates. Common lodging houses, serais and houses of a similar nature should be most carefully examined. (13). If plague breaks out, then isolation of cases is a great necessity. When practicable, such isolation may be done in the house of the patient. The patient should be kept in a separate room apart from those where other inmates of the house live. A temporary room could be put up on the roof of a house or in the compound, if there is any, or a tent may be pitched. Where possible, all healthy inmates of the house should at once remove themselves in camp leaving only such near relatives who must attend and nurse the patient. For patients living in lodging houses, or, where there is no means of such isolation as stated above, segregation in special isolation hospitals should at once be done. The isolation hospitals should be separate for each of the following classes—(a) for lower class people; (b) for middle class people; (c) for such people of the middle or upper class who may chose to pay for their expenses. It is needless to say that there should be special hospitals for women, where only female attendants and nurses should be employed. Hospitals should be provided with means for free ventilation, both for the sake of patients as well as attendants. No other disease requires more careful nursing than the plague, therefore ample nursing staff should be provided. The hospitals should have a separate observation ward and a separate convalescent ward, and by no means doubtful cases should be mixed up with confirmed cases. Disinfecting apparatus, sterilizers, good water supply and special laundry are other adjuncts essentially necessary for a plague hospital. Greatest care is required in the management of such a hospital, and only trained men should be employed. Suitable means for ambulance should be provided, and should be had ready within convenient distances. They should be thoroughly
- 26. disinfected after the conveyance of any case. Ambulance carts or doolies should be comfortable, for physical exertion and exhaustion, attending a long journey in the early stage, greatly compromise chance of recovery. Burial within inhabited areas of a town or village should be stopped. Dead bodies should be removed under strict precautions for disinfection and disposed off quickly. Bodies should be buried deeply —4 to 6 feet.
- 27. 30 PRIVATE HYGIENE. I. Houses and compounds, stables, kitchen and outhouses should be thoroughly cleaned, and they should be whitewashed with lime. Air- tight dustbins should be kept in the house. II. Rooms, specially bed-rooms, should be well ventilated, attention should be paid to the condition of the floor, which should not be damp, and care should be taken that rats may not infest the house and spaces under the floor. If dead rats are found in the house, they should be removed and burnt, and the place thoroughly disinfected. III. House drains should be cleaned and well flushed with a disinfectant solution. IV. Nowhere in the house or compound should any kind of organic refuse be allowed to accumulate. Better not use any organic manure in the kitchen garden or house garden during an epidemic. V. Articles of food should not be allowed to remain uncovered on the table or elsewhere, for there is chance of their infection by flies, mice, or rats. VI. Clothes received from the dhoby’s house should be again boiled in water, dried, and then used. VII. Bed-clothes and wearing apparel should be aired and exposed to the sun daily. As frequently as possible floors and passages should be well washed with a disinfectant solution and then well dried. VIII. There should not be any over-crowding in bed-rooms.
- 28. 31 IX. Drinking water should be boiled before use. Raw vegetables, such as salad, cucumber, &c., should only be used after thoroughly washing them, and then with vinegar. X. Personal cleanliness should be strictly observed. Daily bath, cleaning the teeth with carbolic tooth powder, and carefully washing hands and mouth before and after meals are essential. XI. Those who have to attend on plague cases should be very careful. Hands should be thoroughly washed with a disinfectant solution, and a nail brush used soon after the patient or anything in contact with him is touched. A bath to which some antiseptic is added should be taken immediately after coming in contact with plague patients. Workers in plague hospitals should be warned about scratches or wounds on their bodies. Use of respirators with an antiseptic sprinkled over the entrance valves is recommended. Only very healthy people should approach plague cases. On the appearance of slightest headache, languor, or fever an attendant should be relieved from duty. XII. As a prophylactic 5 grains of quinine sulphate may be taken twice daily, or a small bottle containing eucalyptus or some other volatile disinfectant, may be carried in the pocket, and a few drops may be occasionally poured on the handkerchief. Smoking good tobacco may have a prophylactic value. XIII. If plague occurs in the house, the following steps should be taken:— (a) The patient should at once be put in bed and kept in a temporary room, which may be put up on the roof of a house. No healthy inmate of the house should go in that room or have any connection with the sick, except those who have to nurse the patient. (b) All discharges, fæces, urine, sputum, vomited matter, &c., should be taken in vessels with disinfectant solution in it, and some
- 29. 32 quicklime should immediately be sprinkled over them. On no account should anything leave the room but to be disinfected. (c) Floor and bedsteads should be washed with a disinfectant solution, clothes and other articles that touch the patient should be carefully disinfected. Crockery and glass should be scalded. If great care and cleanliness are not observed with regard to the bed and body linen of the patient, the infection may be diffused through the air immediately around the patient. (d) A medical man should be at once sent for. Delay is fatal.
- 30. 33 INOCULATION AGAINST PLAGUE. M. Haffkine, of cholera inoculation fame, has commenced to inoculate against the plague under the same principles on which his inoculation against cholera is based. By injecting into the body an attenuated virus of plague, a very mild attack is produced, which in people inoculated has proved harmless. This mild attack, it is thought, would protect the system from more potent forms of the poisonous germs. The inoculation for plague is still in its experimental stage, and cannot, for obvious reasons, be applied to a large population. Medical attendants, nurses and others who, by call of duty, have to constantly come in contact with plague patients may, however, take advantage of this means of protection, which, in the hands of M. Haffkine, may yield good results. Yersin also claims for his serum prophylactic value. In this and all other matters connected with bacteriology, such as germs, sero-therapeutics, &c., the medical profession now-a-days receives a good deal of satirical remarks from sceptical lay public. It is natural that it should be so, for the science of bacteriology is still in its infancy, and many of its practical applications are still in their experimental stage. But undoubtedly the science is advancing, and by its aid we are now better able to understand diseases and their nature. Many facts have been demonstrated and proved with precision. What is disbelieved to-day, may, however, be believed tomorrow, for, with all human attempt to reveal secrets of nature, such is the case. Readers of Smollet’s Roderick Random may remember how in the Surgeon’s Hall one of the examiners said:—“I affirm that all wounds of the intestine whether great or small are mortal.” Now, however, if a man dies of a wound of the intestine, the unfortunate doctor in whose hand such a casualty takes place runs great risk of being charged with malpraxès.
- 31. 34 TREATMENT. I. Hygienic.—The patient should take to bed immediately on the appearance of the first symptoms. The room should have means for free ventilation, and the temperature in it should be between 60° to 70° F. The air of the room may be cooled by a block of ice. The room should be kept clean, and there must not be in it any curtain, carpet or hangings. The floor and bedsteads should be daily washed with a disinfectant solution. A position of absolute rest in bed is to be maintained throughout the illness. Bedpan and urinal should be always used. Bedclothes should be light and warm. Wearing apparel if saturated with perspiration should be changed. It is best to have two beds side by side so as to be able to move the patient easily from one to another for cleansing purposes. Mattresses should be suitably protected from penetration by the discharges. The air of the sickroom can be made antiseptic by placing pieces of blotting paper saturated with eucalyptus oil or phenol on plates about the apartment or by pouring carbolic acid on hot water in a plate. The doorways should be curtained by a sheet wet with disinfectant solution. Great cleanliness of the body of the patient should be enforced by cold sponging with an antiseptic solution. Skilful nursing is essentially necessary. The motions should be disinfected by strong antiseptics such as quicklime, carbolic acid, &c., as soon as they are passed. II. Dietetic.—From the commencement of the disease the diet should be liquid and nourishing. Milk is best. The quantity for adults should not be less than three or four pints in the twenty-four hours. It must be given in small quantities at short intervals. Soda, potash or plain carbonated water may be mixed with it. Barley water and thin sago water may also be given. If the patient’s vital powers are low, the milk may be peptonised by using Fairchild’s powders or by
- 32. 35 adding a little of Benger’s Liquor Pancreatices. In cases when milk cannot be taken in sufficient amount, animal food may be given in the form of plain meat broth. Egg-flip with or without brandy may also be given. It is useless to give strong meat essences when the digestive powers are seriously impaired, and excess of zeal in this direction does a great deal of harm. These accumulate in the intestinal canal and form a fermenting mixture in which poisonous ptomaines form. Throughout the attack the patient’s strength should be husbanded as carefully as possible. When there is thirst, water, or iced water, or iced beer or stout, or ice-cream, or fruit sherbat should be given. During convalescence great care should be taken of diet, for then the vital powers are at a very low ebb. III. External.—In order to lower the temperature rubbing of the skin with oil from the commencement of the disease has been recommended, but this procedure is, I think, of no use. I suggest, however, that when temperature is high 15 drops of Creosote may be rubbed near the axilla. During height of fever, the body may be lightly sponged all over, twice or thrice a day, with the following solution:— Thymol 40 grains. Spirit Lavendula 2 oz. Spirit Vin. rectif. 3 ” Acid Acetic dil. 3 ” Aquæ Rose add 16 ” Mustard plasters to limbs and over the heart should be given when there are signs of failing heart and circulation, and over the epigastrium when there is vomiting or hiccough. Smelling salts and strong ammonia should be applied to the nostrils for their restorative action. Blister over the nape of the neck is useful when cerebral symptoms are present. Ice caps over the head is very useful and should be applied continuously. The enlarged glands may be
- 33. 36 fomented with hot water or spongio-piline wrung out of hot antiseptic solution. When they are much painful, poppy or belladonna may be added to the water. Belladonna with glycerine should be applied in the beginning and iodine afterwards. Hot corrosive sublimate fomentations are also useful. If the glands suppurate, they should be opened aseptically and dressed with antiseptics. Proper drainage should be provided. IV. Internal.—Knowing as we do that the plague is due to the toxic products metabolized by a pathogenic bacillus, the question comes— would an antiseptic treatment be of any use? Can we by any means induce an antiseptic action on the blood, or have we any drug which can act as antitoxin? It must be at once stated that no drug that has been tried yet fulfils the above conditions. The claims of quinine, however, should be taken into account. This drug in small repeated doses acts as a general antiseptic. I would, therefore, advocate its use especially in the early stages. Plague is a disease in which collapse sets in early and cardiac asthenia is a very early complication. There is, therefore, great urgency for early stimulation. Alcohol may be given freely, but at the same time it must be remembered that if the organs of elimination are not acting properly, alcohol may do harm. For their stimulant effects whiskey or iced champagne may be given. Carbonate of ammonia or spirit ammonia aromatic are held to be very useful stimulants in plague cases. They may be given in combination with cinchona, digitalis and ether. A prescription like the following may be useful:— Ammonia Carb. 5 grains. Chloric Ether 20 minims. Sulphuric Ether 15 ” Tint. Digitalis 5 ” Tint. Cinchona 1 dram. Aquæ Camphor 1 ounce. Every three hours.
- 34. 37 38 For cardiac asthenia, the following may be tried:—(1) Caffeine, hypodermically, 5-grains dissolved by the aid of 5 grains of Sodium Benzoate in 20 minims of warm distilled water and injected three or four times a day if needful; (2) Ether or ethereal solution of camphor hypodermically; (3) Strychnine, hypodermically, beginning with gr. 1/60 every four or six hours till gr. 1/16 is injected, or Liquor Strychnia in 5—10-minim doses every four hours; (3) Musk may be given in 5-grain doses, or as in the following mixture:— Pulv. Moschi 10 grains. Mucilage Acacia 2 drams. Syr. Aurantii 2 ” Aquæ Camphor ½ ounce. To be given every 6 hours. Digitalis does not always give good results, a fact which Lowson attributes to some inflammatory or fatty degenerative changes in the small vessels giving rise to a tendency to hæmorrhage. Stropanthus may be substituted. Transfusion of blood a hot saline solution and inhalation of oxygen have been recommended for collapse. Dr. Viegas of Bombay recommends Liquor Hydrasgyie Perchloride 10 to 15 minims every four hours if there is no albumen in the urine. Dr. Dimmock has advised subcutaneous injection of Guaicol 10 or 15 minims every two hours. Permanganate of Potash 5 to 12 grains in 24 hours has also been recommended. Dr. Blaney has recommended Medritina in two-dram doses every two hours when the kidneys are involved. Camphor has been recommended by some as a cardiac stimulant.
- 35. 39 TREATMENT OF SYMPTOMS. (1). High temperature may be reduced by antipyretics, such as antipyrin, phenacetin, antifebrine, &c. These drugs produce profuse perspiration and a certain amount of depression; it is, therefore, advisable to restrict their use during the first few hours only, and if not found responding, they should be dropped altogether. Pyrexia is but a sign of the intensity of the activities of the infective agent, and by artificially reducing the body heat we really do not lessen the virulence of the poison, as shown by the rise of the temperature again as soon as the action of the antipyretic subsides. Hyperpyrexia itself is, however, an injurious symptom, and when there is long continued high temperature it is necessary to reduce it, either by an antipyretic, quinine or cold bath, or cold sponging. Cold bath is not suitable in plague patients on account of the movement of the body which it entails, and also on account of the serious cardiac depression which accompanies the disease. Two grains of phenacetin with 1 grain of hydrobromate of quinine is a safe antipyretic. Brandy and tepid sponging are also very useful. (2). Brain symptoms.—For headache a mustard plaster behind the upper part of the neck and over the occiput. Ice cap or Lieter’s tube or plain water should be applied over the temples and scalp. Nervine sedatives, such as Potassium Bromide, may be given for insomnia when there is not much depression. Otherwise full doses of alcohol may be tried. Opium should not be used, but in mild cases, without great depression, 10 to 20 minims of Liquor Opii sedativus with 30 minims of Sal Volatile in an ounce of camphor water may be given to soothe nervous unrest. For insomnia Lowson speaks highly of Morpinæ gr. 1/8 to gr. ½. Hyoscine gr. 1/200 to gr. 1/75 may be tried. Meningites should be treated by cold to the scalp and counter-irritation to the nape of the neck and occiput.
- 36. 40 (3). Hæmorrhages may be treated by Ergot or Ergotin internally or hypodermically. When there is much hæmorrhage, use of alcohol should be partly suspended. (4). If there is constipation, a dose of calomel may be given. In the beginning there is almost always constipation, which should be removed by a dose of calomel followed by a saline. Diarrhœa may be checked by an enema of opium. Two grains of Dover’s powder and 10 grains of tannin mixed with an ounce of gum mucilage and with two or three ounces of warm water, arrowroot or starch may be used for injection. Salol in 10-grain doses every 4 hours may be given for diarrhœa. For vomiting and hiccough sinapism over the epigastrium, sucking of ice, and for thirst acidulated water with syrup of lemon are recommended. Coma must be promptly met by cold effusion if there is pyrexia or by rectal injection of strong coffee. The bladder of the patient should be carefully watched. Pneumonia and other complications should be treated under general principles. When temperature falls and convalescence begins, the stimulants should be lessened, and afterwards a tonic with quinine, acid nitromuriatic dil., tincture calumba or quassia may be given with infusion aurantii. Serum treatment.—The whole system of serum therapeutics is due to the genius of Pasteur. Diphtheria and tetanus are diseases that are caused by specific germs and are now successfully treated by immunised serum. Tetanus can be prevented and even cured by the injection of serum of other animals vaccinated against this disease: this process has been applied by Yersin for producing a plague serum, for which a prophylactic and curative power is claimed, and this serum may be called plague antitoxin. Yersin treated his first case in Canton. At Amoy, the people were less averse to treatment, and in 10 days he was able to treat 23 with two deaths only. As yet Yersin’s serum has been tried in the declared diseases, but Yersin also proposes to use it as a preventive. Haffkine also proposes to make use of his serum for curative purpose. Yersin’s serum is older
- 37. than Haffkine’s, otherwise bacteriologically they are identical. The subject is in far too unsettled a condition at present, but it has no doubt a hopeful future before it.
- 38. 41 DISINFECTION. Substances which can prevent infectious diseases from spreading by destroying their specific germs are called disinfectants. These disinfectants can kill pathogenic germs. Heat is a most powerful agent in killing-germs, therefore anything which is subjected to prolonged boiling becomes sterile or germ-free. For purification of clothes and bedding, heat is the best agent, either by boiling them in water or by placing them in a hot-air chamber. The usual arrangement is a furnace with the smoke shaft passing under or on one side of a brick chamber and with a hot-air blast from a shaft running through or under the fire into the chamber itself, or into a passage below it, whence it passes into the chamber through a valve; an exit for the hot-air is provided at the top of the chamber, the clothes are suspended in the chamber, at a little distance from the walls. Various kinds of ingenious apparatus have been recently contrived and are used. Steam disinfecting chambers are necessary for the disinfection of clothes, &c., of a large population, and all large towns and railway stations should have them. High pressure steam in an apparatus contrived for the intermission of its pressure is found to give the best heat penetration to large non-conducting articles such as bedding. Fumigation by burning sulphur or chlorine is a very useful method for disinfection of rooms. Large bonfires of sulphur may also have a beneficial effect on the air.
- 39. 42 PURIFICATION OF A ROOM AFTER PLAGUE CASES— All woodwork should be thoroughly cleansed with soft soap and water, to which a little carbolic acid has been added. The walls should be scraped and then washed with hot lime to which carbolic acid should be added in the proportion of one pint to four gallons of water. Then the room should be fumigated for 3 hours, with all doors and windows and the chimney being closed, sulphur about 1 seer for every 100 cubic feet of space should be put in a metallic dish, a little alcohol is poured on it, and it is lighted. After 3 hours the doors and windows should be opened and kept open for 24 or 36 hours. Rooms may be disinfected by chlorine. Carbolic acid in 5 per cent. solution is useful for all ordinary purposes, such as washing hands, utensils, &c. Quicklime is the cheapest and the most easily procurable disinfectant for drains and for disinfection of discharges. Carbolic powder made by adding carbolic acid to lime is very useful for the disinfection of public latrines, drains and sewers. Corrosive sublimate, in the proportion of 1 part in 4,000, is the most efficient germicide known and should be used diluted with water for sprinkling on public roads and for flushing drains and washing latrines, &c. It is, however, poisonous and corrodes metal drain pipes. In quarantine or isolation camp the latrines should be of the dry earth system. Carbolic acid powder should be largely used in them. The question of suitable disposal of sewage depends on the circumstances of each town or village, but incineration is the most sanitary method during an epidemic. Other disinfectants too, such as Jey’s Fluid, Creoline, Phenyle, Izal, Sanitas, may also be used.
- 40. Transcriber’s Notes Silently corrected a few typos. Retained publication information from the printed edition: this eBook is public-domain in the country of publication. In the text versions only, text in italics is delimited by _underscores_.
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