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Question : Based on the article above, and using positive accounting theory arguments: Predict the relationship between the use of income increasing methods and size
Question : Based on the article above, and using positive accounting theory arguments: Predict the relationship between the use of income increasing methods and size of the pharmaceutical companies.
In recent years the pharmaceutical industry has been severely criticized and assaulted with mandatory pricing concessions and new taxes. Since the 1992 presidential campaign, the United States has begun to focus on health care costs. This continued focus on the pharmaceutical industry extends to the 2000 presidential campaign. Both major candidates acknowledged the high cost of prescription medication and the apparent need for greater prescription drug availability. Frequently pharmaceutical firm profits have been in the spotlight. During the same time, Congress was enacting laws to force lower drug prices. As part of the Omnibus Budget Reconciliation Act of 1990, pharmaceutical firms were mandated to pay refunds to Medicare if they sold prescription drugs at a lower price to anyone else. Additionally, in October 1992 Congress passed the Prescription Drug User-Fee Act (PDUFA), which required pharmaceutical firms to pay the U.S. Food and Drug Administration substantial fees when submitting new drug applications. PDUFA also required pharmaceutical firms to pay an additional fee for each manufacturing 'establishment' and a fee for each product manufactured. The political pressures levied against the industry were sufficiently strong so that Bristol-Myers Squibb included a supplement with their 1992 annual report. The supplement provided the company's responses to the recent criticisms levied on the industry. The primary criticisms levied against the industry revolve around the notion that the industry is making unnecessarily high profits and that pharmaceutical firms are spending too much on advertising costs relative to research and development. The market reaction to the escalating political debate was as expected. Starting after the October 1987 market crash, the Value Line ranking for timeliness of the pharmaceutical industry was 31 st among 93 industries evaluated. By November 1990, the industry had risen to the top out of 97 industries evaluated. Beginning in February 1992 , the ranking began to fall such that by August 1993 the industry was ranked 54 th out of the 98 industries evaluated. Excerpt taken from: Gara, S. C., (2000) Political Costs and Accounting Method Choice: The Pharmaceutical industry, MidAtlantic Journal of Business. Required: Based on the article above and using the positive accounting theory arguments: (a) Predict the relationship between the use of income increasing methods and size of the pharmaceutical companies. In recent years the pharmaceutical industry has been severely criticized and assaulted with mandatory pricing concessions and new taxes. Since the 1992 presidential campaign, the United States has begun to focus on health care costs. This continued focus on the pharmaceutical industry extends to the 2000 presidential campaign. Both major candidates acknowledged the high cost of prescription medication and the apparent need for greater prescription drug availability. Frequently pharmaceutical firm profits have been in the spotlight. During the same time, Congress was enacting laws to force lower drug prices. As part of the Omnibus Budget Reconciliation Act of 1990, pharmaceutical firms were mandated to pay refunds to Medicare if they sold prescription drugs at a lower price to anyone else. Additionally, in October 1992 Congress passed the Prescription Drug User-Fee Act (PDUFA), which required pharmaceutical firms to pay the U.S. Food and Drug Administration substantial fees when submitting new drug applications. PDUFA also required pharmaceutical firms to pay an additional fee for each manufacturing 'establishment' and a fee for each product manufactured. The political pressures levied against the industry were sufficiently strong so that Bristol-Myers Squibb included a supplement with their 1992 annual report. The supplement provided the company's responses to the recent criticisms levied on the industry. The primary criticisms levied against the industry revolve around the notion that the industry is making unnecessarily high profits and that pharmaceutical firms are spending too much on advertising costs relative to research and development. The market reaction to the escalating political debate was as expected. Starting after the October 1987 market crash, the Value Line ranking for timeliness of the pharmaceutical industry was 31 st among 93 industries evaluated. By November 1990, the industry had risen to the top out of 97 industries evaluated. Beginning in February 1992 , the ranking began to fall such that by August 1993 the industry was ranked 54 th out of the 98 industries evaluated. Excerpt taken from: Gara, S. C., (2000) Political Costs and Accounting Method Choice: The Pharmaceutical industry, MidAtlantic Journal of Business. Required: Based on the article above and using the positive accounting theory arguments: (a) Predict the relationship between the use of income increasing methods and size of the pharmaceutical companiesStep by Step Solution
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