Chapter 20 – Neurofinance

20. 1 INTRODUCTION In this book we have argued that cognition and emotion are powerful influences on people’s decisions. Traders are, of course, no different. This chapter begins by considering what we know about what sets a successful trader apart from other people. We have all contemplated the oft-debated question of nature versus nurture in explaining whether a person thrives or fails. In this final chapter, we further investigate where choices come from. The evidence suggests that there are both environmental and biological foundations. The chapter begins in Section 20. with a discussion of expertise, namely, what makes a skillful trader? Cognitive skills are honed through practice and repetition, but emotion also has a significant role. Next, in Section 20. 3, we turn to the emerging field of neurofinance. Using imaging technology, researchers are contributing to our understanding of how people make decisions. In Section 20. 4, we describe some of the insights recently pr ovided by neurofinance researchers. These researchers have found that cognition and emotion have complementary effects. Traders whose emotions appear to be in balance perform the best.Uncertainty and risk are experienced differently by our brains, as are gains versus losses and risk versus return. The chapter concludes in Section 20. 5 with some practical advice. 20. 2 EXPERTISE AND IMPLICIT LEARNING Consider the following situation. You are at a large concert and run into a good friend, Molly. Of course, you recognize her face immediately. Now think about this. What if, instead, you know Molly is at the concert but is seated across the venue. The friend you came to the concert with, Amy, is going to look for Molly, but the two have never met.You do your best at describing Molly to Amy. What’s the chance that Amy will be able to identify Molly among thousands of concert goers? Not too likely. Much of what we know we cannot describe in words. A face is a very complex thing, an d we simply do not have enough words to explicitly describe one particular person very accurately. Language is categorical, whereas the distinguishing features of two similar faces may be fuzzy. Some cognitive scientists assert that people have knowledge that they cannot verbalize, referred to as implicit learning or tacit knowledge.Brett Steenbarger argues that traders also have information about markets that they cannot adequately describe in words. Like a human face, markets are probably more complex than the language we have to describe them. Does this mean we need a finer grid with which to describe markets? Or, does this view suggest that we need to better understand how traders make decisions? Excellence in most fields requires expertise. How do we define expertise? Usually we think in terms of relative performance so that those at the top of their game are considered to be the experts.Because of tacit knowledge, an expert chess player or pro football player often knows insti nctively what the best move is, perhaps without any cognitive evaluation whatsoever. Recall in our discussion of the foundations of emotion in Chapter 7 that psychologists believe that emotions can develop completely independently from cognition. In other words, you can feel fear without first cognitively recognizing what is making you fearful. While observing a market, a trader may instinctively know the move he wants to make.Steenbarger notes that in many instances traders will make similar buy or sell decisions and then, ex post, provide very different descriptions of the information that led to the decision. The traders saw the same information, acted the same way, but understood their behavior quite differently. Perhaps a trader makes a decision based on instinct with no preceding cognitive evaluation. Afterward, the trader generates an explanation that is cognitively consistent with his expectations. Steenbarger argues that â€Å"the successful trader feels the market but doe s not become lost in those feelings. Studies of expert athletic performers have reached similar conclusions. For example, one study argues that â€Å"emotions, and the capability to regulate them effectively, arguably account for a large portion of the variance in athletic performance. † In the trading domain, an expert trader often has a gut feeling about a particular situation but remains in control by taking careful, deliberate action. Does this mean that trading expertise is innate and cannot be learned? Reading the information in a market could be like understanding a social interaction. Some people are just better at it than others.While some level of innate ability is probably requisite, the evidence suggests that expertise is finely honed. Not too many of us would believe that a professional quarterback spent his teen and early adult years watching football on television while sitting on the couch eating chips. Knowing the rules of a game does not make you good at the game. Practice and repetition are common ingredients across successful experts. For example, accomplished violinists spend, on average, 10,000 hours practicing. Successful traders also devote a lot of time to practice.This practice gives them the ability to connect what they know about a market to the action they should take. Through implicit learning they are able to make better and more efficient decisions. A day trader who spends hours, or even minutes, evaluating a current market circumstance before making a trading decision will certainly find it difficult to succeed. 20. 3 NEUROFINANCE While we know that practice is necessary to hone any skill, unlocking the mysteries of the brain is an important key to understanding how to promote the development of expertise in any realm, including investing.Are evolutionary theorists correct in their contention that our basic emotions have evolved to promote the survival of the species as we discussed in Chapter 7? Do expert performers hav e innate characteristics, or can anyone develop expertise in trading? Neurofinance and neuroeconomics use neurotechnology to examine how the brain behaves while a person is making financial and economic decisions. In these new and growing fields, results from economics, finance, psychology, and neuroscience provide the basis for further investigation.Neuroscience uses brain imaging, as we described in Chapter 7, to understand brain activity and how the brain works. With this technology, scientists can actually measure emotional response. The potential of the technology has not gone unnoticed by practitioners. In fact, Jason Zweig, senior writer for Money magazine and guest columnist for Time magazine and cnn. com writes: I’ve been a financial journalist since 1987, and nothing I’ve ever learned about investing has excited me more than the spectacular findings emerging form the study of â€Å"neuroeconomics. Thanks to this newborn field †¦ we can begin to understa nd what drives investing behavior not only on the theoretical or practical level, but as a basic biological function. These flashes of fundamental insight will enable you to see as never before what makes you tick as an investor. Investors who better understand â€Å"what makes them tick† will be better prepared to make good investment decisions. It is important to understand that neuroscience is not simply interested in mapping out parts of the brain. Instead, by looking at how the brain reacts during various activities, scientists can understand how the brain functions and solves problems.We will better understand the mix of cognitive processing and emotional responses. Which responses are controlled and which are automatic responses? These insights will allow economic theorists to improve models of decision-making, as well as investor education efforts. Recall from our earlier discussion of the brain that automatic and controlled responses are associated with different par ts of the brain. Automatic responses often stimulate the amygdala, whereas controlled responses activate the forebrain (or prefrontal cortex). Using imaging technology, scientists can observe the areas of the brain that are activated during a task.In Chapter 7 we also talked about Damasio’s studies of the behavior of brain-damaged patients. The patients were emotionally flat due to frontal brain lobe damage, and Damasio concluded that decision-making and emotion are intertwined. Though studies of braindamaged patients can be informative, brain imaging technology allows more control so that research can be conducted with greater precision. Neuroscientists are making great progress on brain function, and, as a result, researchers are proposing new models and theories that better incorporate aspects of psychology, including emotion. 0. 4 INSIGHTS FROM NEUROFINANCE Neuroscientists have investigated a variety of questions related to financial decision-making. Several studies have lent insight into the forces of emotion on trading by studying the physiological characteristics of professional securities traders while they were actively engaged in live trading. In one study significant correlations between market movements and physiological characteristics such as skin conductance and cardiovascular data were reported. Differences were also detected across traders, perhaps related to trading experience.Another study looked at whether emotion was found to be an important determinant of a trader’s ability to succeed in financial markets. It was found that those whose reaction to gains and losses was most intense had the worst trading performance, suggesting the obvious need for balanced emotions. Brain imaging has been used as experimental participants have made risky choices. This research indicates that how gains and losses are both anticipated and realized is likely to differ inasmuch as different regions of the brain are activated.When gains are antici pated, a subcortical region known as the nucleus accumbens (NAcc) becomes active. This region is rich in dopamine, a substance that has been associated with both the positive affect of monetary rewards and addictive drug use. The fact that this region is only active during anticipated gains (but not losses) lends plausibility to the differential experiencing of gains and losses in prospect theory. Other brain imaging research indicates that what might lie behind ambiguity aversion is the fact that risk and uncertainty are experienced in different ways.Recall in Chapter 1 where we discussed the distinction between risk and uncertainty. With a risky choice, the person can assess the probability of the outcomes, but under uncertainty the probabilities are unknown. The distinction is important here because the brain may evaluate a choice in a risky situation differently from a choice when one faces uncertainty. Research indicates that when facing uncertainty the most active regions were the orbitofrontal cortex (a region integrating emotion and cognition) and the amygdala (a region central to emotional reaction).In contrast, when facing risk, the brain areas that responded during their task were typically in the parietal lobes so that the researchers concluded that choices in this setting were driven by cognitive factors. In sum, uncertainty appears to be more strongly associated with an emotional response, while risk leads to a cognitive reaction. It has been suggested that when times becomes more uncertain (for example in 2008, as was described in Chapter 14), the inability of investors to properly assess the distribution of future returns leads to their moving from rational deliberation to a primarily emotional response.The result could be widespread unwillingness to hold risky assets in turbulent markets, a tendency that can only exacerbate market declines. A neural test of myopic loss aversion has also been conducted. A group of patients with brain lesions on areas known to be associated with the processing of emotions were compared to a control group. The former group was significantly more likely to take on risk than the control group. Further, the lesion group exhibited greater consistency in their levels of risk aversion. In other words, those with a reduced capacity for fearful responses behaved in a manner more in line with expected utility theory.Another study focused on how decision-makers’ brains reacted to varying levels of risk, rather than on learning or expected values. Using a gambling game, expected values and risk were varied while participants’ brain activation was monitored. As is typical in finance, rewards were measured using expected payoffs and risk using the variance of payoffs. Interestingly, the researchers report that brain activation varied in both time and location for reward and risk. Brain activation in response to rewards was immediate, whereas brain activation in response to risk was delayed .Time and location of activation is important because if we can separate the effects of risk and reward in the brain, researchers can further investigate how changes in risk perception affect decision-making. For example, they could examine how misperception of risk and cognitive difficulties contribute to less-than-optimal behavior. 20. 5 EXPERTISE AND EMOTION Research indicates that understanding neural responses will help us to gain insight into some of the puzzles we have talked about in this book. In addition, there are important implications for trader education.We are all familiar with the old adage that â€Å"practice makes perfect. † In order to gain expertise, it is important to know the rules of the game, so reading up on investing is not a bad idea. But, at the same time, much practice through many simulations under divergent market conditions will promote better decision-making while trading. But, does it pay to become an expert? While we know that many long hour s of studying and practice are required, is this effort sufficiently rewarded? There is evidence that this question can be answered in the affirmative for financial practitioners.One researcher constructed a â€Å"differential reward index† as the income for a specified percentile divided by the median income for each occupation. This measure allows us to differentiate high average income from high income for those whose expertise is greatest in a particular profession. For financial and business advisors, including stock brokers, earnings are related closely to achievement. At the 90th percentile the differential reward index was 3. 5, indicating that the top 10% earned 3. 5 times more than the median income level.In fact, this was the largest observed value for the differential reward index across all occupations studied! Thus the evidence suggests that the benefit of becoming a skilled financial advisor may far exceed the cost. So how can one become an expert? Researchers have concluded that tacit knowledge is an important predictor of success in business as measured by salary, rank, and the level of one’s company (e. g. , whether it is among the top 500 in the Fortune rankings). Practical knowledge, or the ability to gain tacit knowledge and turn it into a good strategy, is a function of a person’s environment and ability.Thus, with a certain level of competence, hard work can be translated into success. A successful trader, nonetheless, should always remember that emotion is critical to the outcome. We have argued throughout this book that emotion can enhance decision-making. Previously cited evidence suggested, however, that traders are advised to be wary of intense emotional reactions. Another recent study used neuroimaging to examine how decision-makers’ brains responded while playing the ultimatum game described in Chapter 11.When unfair offers were rejected by the responders, the investigators reported significant increase s in brain activity in the anterior insula, a brain area associated with emotion. Recall that even offers that are viewed as unfair should be accepted by a responder who cares only about increasing her earnings. Thus, traders are advised to exert their cognitive skills when experiencing a strong emotional reaction in order to overcome the tendency to react emotionally, just as a responder in the ultimatum game who is aware of his emotional response is well advised to accept an offer even if it seems unfair.Emotional responses and cognitive evaluations of risk can be quite different. Think about how many people perceive the risks of automobile and airplane accidents. Though riding in an automobile has been shown to be the less safe alternative, often an emotional response plays the dominant role, which may keep some people off airplanes. CHAPTER HIGHLIGHTS 1. Expertise is defined in terms of relative performance so that those at the top of their game are considered to be the experts. 2. Implicit learning reflects knowledge that cannot be described using language. 3.Experts have developed implicit knowledge that enhances performance in their particular domain. 4. Neurofinance uses brain imaging technology and results from economics, finance, and psychology to better understand how the brain works. 5. Physiological differences exist across professional traders, and emotion is an important determinant of a trader’s ability. 6. Measured brain responses to changes in risk and reward vary in both location and time of activation. 7. Practice is necessary to excel in trading, and good traders may make decisions based on gut feelings, while at the same time ensuring that they control their emotional responses.

Brock article 1 Essay

(10) In understanding the idea presented by Brock as far as the idea of professional norms are voluntarily adopted, it is essential to point out the two elements that go together with it. The first one involves the creation of norms and values of a specific profession that is often imposed unto its members (Brock,). In this idea, the organization should also coordinate and collaborate with related agencies and institutions that specialize in such area. The second idea refers to the ability of each professional to directly adhere to the norms his/her organization provides (Brock,). It is through such entry that the individual takes on these facets accordingly. (11) The term conventional compromise provided by Brock in the article revolves around the question and issue of moral implications in the practice and facilitation of medicine. Under this facet, the term revolves around a â€Å"physician/pharmacist who has a serious moral objection providing a service/product to a patient/customer is not required to do so† (Brock, 2008, p. 194). At the same time, it is in here that there are several conditions that must also be looked into before saying that a particular case or issue has undergone a conventional compromise. These facets include (1) proper information so as to the facilitation of service/product, (2) proper referrals to other professionals who can provide, and (3) the second facet will not cause burden or difficulty for the patient (Brock, 2008). Under the first facet, there needs to be proper support and ground for the facilitation of a service or mechanism so as to fit the described example. It is in here that active communication about the practice must be given to any patient before declining its prescription or rendering of service (Brock, 2008). On the second facet, it requires the ability of any medical professional to have access to networks that have relatively opinions as theirs as far as the issue is concerned. This will then satisfy the condition that patients can seek for alternatives of providers of such device/service (Brock, 2008). Lastly, there must be careful consideration as far as its suitability and preference of patients are concerned. Since these ideas are prone to subjectivity, medical professionals must then establish these areas to connote the term conventional compromise (Brock, 2008) (12) In responding to the case of the pharmacist, Brock would probably argue against the notion set by the pharmacist. This is because this profession is part of an organization wherein the norms and objectives are stipulated accordingly (Brock, 2008). The action committed by the person is only a matter of moral conscience and does not solely revolve around the basic standpoint of the profession. Likewise, foregoing the facilitation of contraceptives as an option disregards the fact that the organization he/she is part of considers this as an option for practice (Brock, 2008). These are some tenets that is included when she agreed to be part of the institution and agency and collaborated with standards provided by concerned agencies (Brock, 2008). Seeing this disposition, Brock would then argue to the pharmacist that he/she practice a conventional compromise wherein she will actively provide and designate a professional who may think and view the issue differently from his/her perspective. This a way to protect both the opinion and value set of the pharmacist and ability of the patient to recognize the possible options available for him/her (Brock, 2008). By doing this, it can prevent conflict and questions surrounding the ability of such medical professional to provide numerous options for patients despite the differences in opinions and values. Reference Brock, D. W. (2008) Conscientious refusal by physicians and pharmacists: who is obligated and why? in Springer Science. Retrieved June 25, 2009. 187-200.

Fair Value Accounting: Its Impacts on Financial Reporting and How It Can Be Enhanced to Provide More Clarity and Reliability of Information for Users of Financial Statements

International Journal of Business and Social Science Vol. 2 No. 20; November 2011 Fair Value Accounting: Its Impacts on Financial Reporting and How It Can Be Enhanced to Provide More Clarity and Reliability of Information for Users of Financial Statements Ashford C. Chea School of Business, Kentucky Wesleyan College 4721 Covert Avenue, Evansville IN 47714 USA Abstract The author begins the paper with a brief historical development of the Statement of Financial Accounting Standards (FAS 157) and its impact on fair value accounting.This is followed by the methodology employed in the research. Next, he reviews the literature on major issues in fair value accounting and financial reporting, and presents his findings from the study. The researcher ends the paper with recommendations to enhance the usefulness of fair value accounting and draws implications for financial reporting and users of financial statements.Keywords: Fair Value, Measurement, Financial Instruments, Market 1. INTRODUCT ION In December of 2001, accounting standard-setters around the world published a consultation paper (Financial instruments and similar items) that proposes fundamental changes to the way financial instruments are reported in the accounts of companies.In particular, the paper proposes, inter alia, that all financial instruments should be measured at fair value. The banking sector has long argued that such an approach is not appropriate for banks and that, to the extent that there are weaknesses in the way that banks currently account for their financial instruments, those ills are better addressed through incremental, than fundamental , change (Ebling, 2001).The Financial Instruments Joint Working Party of standard setters (JWP) main proposal are that: (a) all types of entity should measure all their financial instruments at fair value, and should recognize all changes in those fair values immediately in the profit and loss account; (b) the fair value of an instrument should be its estimated market exit price; (c) no exceptions should be made for financial instruments used in hedging arrangements (i. e. there should be no hedge accounting for financial instruments( Bies, 2005)).In other words, a financial asset for which an active market exists should be carried in the balance sheet at its market bid price and changes in that bid price should be recognized immediately in the profit and loss account. This would be the case regardless of the reason why the instrument is being held –for example, even if it is being held as a hedging instrument or being held until it matures—and regardless of the cause or nature of the market price change involved (Ebling, 2001). FAS 157 – Statement of Financial Accounting Standards No. 57, Fair Value Measurements—defines fair value and establishes a frame work for measuring fair value in generally accepted accounting principles (GAAP). While previous pronouncements involving valuation focused on what t o measure at fair value, FAS 157—issued by the Financial Accounting Standards Board (FASB) on September 15, 2006—focuses on how to measure fair value (Sinnett, 2007). What is fair value? FAS 157 are quite prescriptive, defining it as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement dates (Chambers, 2008).FAS 157 put in place a framework for fair value measurement and disclosure. Perhaps the most important feature in FAS 157 is the requirement to set out financial statements in three levels that describe the reliability of the inputs used to establish fair value. Fitch describes it as the fair value hierarchy. So Level 1 is quite straightforward, as the price used are identical to the input and discovered in something like a public exchange. It gets quite complicated for Level 2 assets and liabilities, because the prices used might be inferred from an index or another secu rity with similar attributes to the one being measured.Fair value measurement in Level 3 assets are purely model-driven, consisting of unobservable inputs, and have understandably swollen as markets have grown increasingly illiquid and disorderly (Chambers, 2008). For many years, users of financial statements have sought relevant and timely information about financial instruments and off-balance sheet items and activities. It is believe that fair value measurements and recognition of these values in the financial statements, along with adequate disclosures, will provide necessary information to evaluate properly an enterprise’s exposures to financial risks, as well as rewards (Anonymous, 2002). 2  © Centre for Promoting Ideas, USA www. ijbssnet. com This is because fair value reporting reflects the economic reality by showing the volatility inherent in the values of financial instruments given changes in market conditions and operations of the enterprise. Historic cost-base d accounting smoothes these effects, thus, obscuring this volatility and masking the economic impact of various positions held in financial instruments (Anonymous, 2007). 2. METHODOLOGY This paper relies on the literature review of current relevant articles focusing on accounting for fair value.Except where a source was needed specifically for its perspective on broad issues relating to fair value accounting, the author screened by ? fair value accounting? and by numerous variants of keywords, focusing specifically on fair value accounting and financial reporting in firms. Source papers included refereed research studies, empirical reports, and articles from professional journals. Since the literature relating to fair value accounting is voluminous, the author used several decision rules in choosing articles.First, because the accounting profession is changing fast in today’s environment, especially for financial instruments, the author used mostly sources published 2002-2010 , except where papers were needed specifically for their historical perspectives. Second, given the author’s aim to provide a practical understanding of the main issues in fair value accounting, he included, in order of priority: refereed empirical research papers, reports, and other relevant literature on current firms’ fair value reporting practices.To get some perspective on the current state of fair value accounting, the author begins with a literature review of some of the most important issues relating to the concept. 3. LITERATURE REVIEW 3. 1. Statement of Financial Accounting Standards (FAS 157) FAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This definition abandons a longstanding practice of using the transaction price for an asset or liability as its initial fair value.In other words, fair value will no longer be base d on what you pay for something; it will now be based on what you can sell it for, also known as its ? exit price.? Just as important, this definition emphasizes that fair value is market based— requiring the consideration of what other market participants might pay for something—and is no longer entityspecific. Valuation will now be determined by a skeptical, rather than optimistic, buyer. In turn, the level of data available to measure fair value will determine how the valuation of an asset or liability is determined.Common valuation techniques identified by FAS 157 are the market approach, income approach and/or cost approach. These models require inputs that reflect assumptions that market participants would use for pricing an asset or liability. Observable inputs would be based on market data obtained from independent sources, such as stock exchange prices. Meanwhile, in the absence of an active market for an asset or liability, unobservable inputs reflect the rep orting entity’s own assumptions.The standard provides a fair value hierarchy that gives highest priority to quoted prices in active markets (defined as level 1) and lowest priority to unobservable inputs (level 3) (Sinnett, 2007). 3. 2. Mark to Market Mark-to-market accounting refers to the accounting standards of assigning a value to a position held in a financial instrument based on the current fair market price, rather than its original cost or book value, for the instrument or similar instruments. Fair value has been part of U. S. generally accepted accounting principles (GAAP) since the early 1990s.Investors demand the use of fair value when estimating the value of assets and liabilities. This has been influenced by investors’ desire for a more realistic appraisal of an institution’s or a company’s current financial position. Mark to market is a measure of the fair value of accounts that can change over time, such as assets and liabilities. For examp le, financial instruments traded on a futures exchange, such as commodity contracts, are marked to market on a daily basis at the market close (Metzger, 2010). When banks mark to market, they follow two steps.First, they estimate the net realizable value of their portfolio of asset-backed securities. This involves discounting the cash flows of these assets. Then under fair value accounting, they have to take a haircut on these values that takes into account the price at which they could sell the assets. When the market is not functioning, of course, this haircut is very large. This is important because it suggests that the huge decline in the value of bank assets is not due to a decline that has certainly occurred—but rather to the market’s judgment about the risk of resale by a purchaser.It is this risks that—when combined with fair value accounting—has forced the write-downs in bank assets (Wallison, 2009). 3. 3. Relevance 13 International Journal of Bu siness and Social Science Vol. 2 No. 20; November 2011 The debate of fair value accounting basically revolves around the issues of relevance and reliability. Before discussing the issues of relevance of fair value, the author looks briefly at how fair value and relevance are generally defined.Fair value is defined in the FASB’s Preliminary View documents as an estimate of the price an entity would realized if it has sold an asset or paid if it had been relieved of a liability on the reporting date in an arm’s –length exchange motivated by normal business consideration. Relevance is defined in the glossary of the FASB Statement of Financial Accounting Concepts No. 2 as the capacity of information to make a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct expectation (Poon, 2004). 3. 4.Reliability and Measurements Reliability is defined in the glossary to the FASB Statemen t of Financial Accounting Concepts No. 2 as the quality of information that assures that information is reasonably free from error and bias and faithfully represented what it purports to represent. Fair value as an estimate of exit value under normal market condition is well defined and noncontroversial when there are well-established liquid markets. What if there is no liquid market? This is the situation in which an estimation of fair value will inevitably involve prediction of future cash flows and selection of appropriate discount rates.These estimates depend on management’s assumptions and measurement error. This has the potential to mask deliberate miscalculation and manipulation of the numbers. Both the FASB and the JWG acknowledge that some significant measurement issues must be resolved and they are working on developing more guidance regarding estimating fair value and establishing appropriate controls. However, it should be noted that the use of estimate is an esse ntial part of preparation of financial statements, e. g. the ubiquitous use of estimates in pension accounting (Poon, 2004).If markets were liquid and transparent for all assets and liabilities, fair value accounting clearly would be reliable information useful in the decision-making process. However, because many assets and liabilities do not have an active market, the inputs and methods for estimating their fair value are more subjective and, therefore, the valuations less reliable (Bies, 2005). 3. 5. Verification As the variety and complexity of financial instruments increases, so does the need for independent verification of fair value estimates.However, verification of valuations that are not based on observable market prices is very challenging. Many of the values will be on inputs and methods selected by management. Estimates based on these judgments will likely be difficult to verify. Both auditors and users of financial statements, including credit portfolio managers, will need to place greater emphasis on understanding how assets and liabilities are measured and how reliable these valuations are when making decision based on them (Bies, 2005). 3. 6.Disclosure The FASB states that the proposed update would change the wording used to describe the principles and requirements in U. S. GAAP for measuring fair value and for disclosing information about fair value measurements. Specifically, the proposed update would include amendments to (a) clarify FASB intent about fair value application of existing fair value measurement and disclosure requirements, and (b) change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements (Elifoglu et al. 2010). 3. 7.Financial Instruments Financial instruments versus nonfinancial instruments—many see fundamental inconsistency between measuring financial instruments at fair value and nonfinancial items largely on historic cost basis. Standard-setters reco gnize that whenever a boundary is drawn between financial statement items with different measurement attributes some inconsistencies and complexities often results. It is argued that there is economic logic in drawing a line between financial instruments and nonfinancial items, and more so than drawing a line including some inancial instruments but not others (Hague, 2002). Conceptually, the periodic returns on financial instruments can be separated into three components with distinct sustainability or certainty. The first two components—amortized cost interest and the difference between fair value interest and amortized cost interest-sum to fair value interest. It is useful to distinguish these two components of fair value interest because amortized cost interest is both sustainable and certain, whereas the difference between fair value interest and amortized cost interest is sustainable but uncertain.The difference between fair value interest and amortized cost interest is sustainable because unexpected changes in interest rates and the resulting unexpected changes in fair values affect fair value interest calculations throughout the remaining lives of financial instruments. 14  © Centre for Promoting Ideas, USA www. ijbssnet. com For example, an unexpected gain on a financial asset due to a decrease in interest rates in the current period reduces expected fair value interest revenue on the asset throughout its remaining life.This third component of the periodic returns to financial instruments is the unexpected change in their fair values during the period. Unexpected changes in the fair values of financial instruments are both unsustainable and uncertain (Ryan & et, al. , 2002). 3. 8. Financial Reporting The reporting of financial assets and liabilities is an election on a contract-by-contract basis and not mandatory. Therefore, not all instruments will necessarily be reported at fair value.In order to distinguish instruments that are reported at fair value from those that employ some other measurement, firms will have one of two reporting options on the statement of financial position. A firm may display the two classifications, fair-value and non-fairvalue carrying amounts, as separate line items on the statement of financial position. The second option for reporting is parenthical disclosure where the firm presents the aggregate of the two classifications and discloses the amount of the fair value parenthically (Schneider & McCarthy, 2007). . 9. Critics of Fair Value Critics argue that fair value accounting has created a false short-term visibility in the case of pension funding and hastened the demise of defined benefit schemes. More generally, critics argue that the financial crisis demonstrates the pro-cyclicality of fair values when accounting is tightly coupled to prudential regulatory systems, and the unreliability of marking to model in less than liquid asset markets, especially for assets which are being held for the long term (Power, 2010).They also add that the impact of fair value accounting (FVA) is likely to be more restrictive lending policies, and more demanding loan covenants, than are necessary for sound risk management, together with pricing which will be higher than is economically necessary (Allatt, 2001). Moreover, several commentators remarked on the fictional and imaginary nature of fair value and bemoaned their subjectivity and potential for manipulation and bias.Regardless of whether these criticisms have substance, it is also the case that if enough people believe in fictions, then they can play a role in constituting markets (Power, 2010). Many are comfortable with historic cost/realization accounting on the grounds that it is familiar and provide a more stable basis for prediction of future accounting than fair values. They argue that fair value based earnings cannot be predicted in the same way because of the effects of uncertain future events and see this as a significa nt drawback in being able to prepare budgets, forecasts, etc. nd to manage analysts’ expectations (Hague, 2002). Nevertheless, many critics of the subjectivity of fair value miss the real point. The very idea of reliability is being reconstructed in front of their eyes by shifting the focus from transactions to economic valuation methods, and by giving these methods a firmer institutional footing. Deep down the fair value debate seems to hinge on fundamentally different conceptions of the basis for reliability in accounting, making it less of a technical dispute and more of the politics of acceptability (Power, 2010). . 10. Proponents of Fair Value Few will question the relevance of information based on market prices as historical cost information is based on market prices at which assets were initially acquired and liabilities were initially incurred whereas fair value are based on current market prices. Fair value reflects the effects of changes in market conditions and cha nges in fair value reflect the effect of changes in market conditions when they take place. In contrast, historical ost information reflects only the effects of conditions that existed when the transaction took place, and the effects of price changes are reflected only when they are realized. As fair value incorporate current information about current market conditions and expectations, they are expected to provide a superior basis for prediction than outdated cost figures can since these outdated cost figures reflect an outdated market conditions and expectations (Poon, 2004).Proponents of fair value in accounting often appeal to notions of telling things as they are and of improving transparency. They point to areas such as pension accounting or the savings and loans industry in North America where fair values would have made problems (deficits, poor performing loans) visible much earlier, thereby enabling corrective action. An often heard trope is that one should not shoot the me ssenger of poor asset quality (Ebling, 2001). 4. FINDINGSWhile there is a large number of assets and liabilities reported or disclosed in financial statements, the percentage of these items and the dollar impact on earnings may not have been exorbitant for most companies, except for financial institutions. 15 International Journal of Business and Social Science Vol. 2 No. 20; November 2011 In 2008, only 27% of the total assets of the S&P 500 companies that had adopted FAS 157 were actually reported at fair value (Zion et al. , 2009). While this represents about $6. 6 trillion in assets, it is still a relatively small percentage of the assets.Because of the mixed attribute model used in U. S. Generally Accepted Accounting Principles (GAAP), some assets are measured using fair value while others—even very similar assets are measured at cost, or amortized cost, or by some other measure. The nature of the assets held by these companies determined, to a large extent, their exposur e to risk in the credit crisis. Companies in the financial sector had a much larger number of fair valued assets (39%) then did, for instance, companies in consumer staples (2%).Even within the financial sector, investment banks and insurance companies, most of whose assets are reported at fair value, were impacted more than commercial banks, whose largest assets is generally loans, which are not reported at fair value (Casabona & Shoaf, 2010). In addition, there is ample empirical evidence to support the relevance of fair value information of financial instruments. For example, Barth (2006) finds that fair valuation of investment securities influences the share price indicating that it provides extra information to investors.Additional discussion of findings of research on accounting for fair value of financial instruments can be found in FASC 1998 study (Poon, 2004). 5. ANALYSIS AND DISCUSSION While most people agree that fair values are the most relevant measure for financial ass ets and liabilities that an entity actively trades, some (most notably, those in the banking industry) argue that historical cost is the more appropriate measure if management intends to hold an asset or to owe a liability until maturity.The rationale for accounting on a historical cost basis is that it better reflects the economic substance of the transactions and the actual cash flow over time. They argue that fair value information, on the other hand, would reflect the effects of transactions and events in which the entity would not participate and thus is often irrelevant. The question here is whether management’s decision to hold assets or to continue to owe liabilities in light of changed market condition is relevant in evaluating the entity’s financial position and performance (Poon, 2004).Some also argue that the outcome of fair value accounting on entity’s financial liabilities is counterintuitive if its credit risks changes. The fair value of a financi al liability will decrease when the issuing entity’s credit risk deteriorates because the interest rate on the initial issue date would now be lower than what it would be if the liability was issued today. Conversely, if an entity’s credit rating improves, an increase in the fair value of its financial liability will result.However, as explained in Barth and Landsman (1995), changes in the credit rating represent wealth transfers between creditors and stockholders. It is not counterintuitive to see a decrease (an increase) in the value of a financial liability when there is a wealth transfer from creditor (stockholders) to stockholders (creditors) corresponding to the deterioration (improvement) of the credit rating of the issuing entity. Therefore, the outcome of fair value accounting is not readily counterintuitive.But as illustrated in Lipe (2002), financial statement users must be better educated about the impact of fair value accounting on financial liabilities. I n particular, a decrease (an increase) in the fair value of financial liabilities should not be interpreted as positive (negative) if it is due to deteriorating (improving) credit quality. In addition, loan covenants have to be revised and financial ratios involving financial liabilities have to be analyzed accordingly (Lipe, 2002).Still another argument against fair value accounting is the induced volatility of earnings if changes in fair values are reported in earnings. Some believe that this volatility of earnings may not correlate to management’s performance and that this would make it more difficult for users to predict future performance. First, this is not a reliability issue since fair values can be reliably measured but still vary a great deal from one period to another.Second, the requirement of fair value reporting does not have to go hand in hand with the requirement of recognizing changes in fair values in reporting earnings (Poon, 2004). For this reason changes in fair value should be separately reported based on causes such as the passage of time, changes in market conditions, changes in the entity’s financial health, changes in estimate, and changes in valuation techniques.Requiring fair value information as supplemental disclosures instead of financial statement recognition also addresses some of the concerns (e. g. , volatility of reported assets, liabilities, and earnings) of the opponents of fair value accounting. In addition, this will allow financial statement users to decide on their own how much reliance they will put on and how to use fair value information (Poon, 2004).FSP FAS 175-4 provides application guidance to assess whether the volume and level of activity for asset or liability have significantly decreased when compared with normal market conditions. However, this assessment should consider whether there are factors present that indicate that the market for the asset is not active at the measurement date, such as : (a) there are few recent transactions based on volume and level of activity in the market, (b) price quotations are not based on current information , 16  © Centre for Promoting Ideas, USA www. ijbssnet. com c) price quotations vary significantly either over time or among market makers , (d) there is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss severities) (e) There is a significant decline or absence of a market for new issuances (Casabona & Shoaf, 2010). Research by Federal Reserve staff shows that fair value estimates for bank loan can vary greatly, depending on the valuation inputs and methodology used. For example, observed market rates for corporate bonds and syndicated loans with lower-rated categories have varied by much as 200 to 500 basis points.Such wide ranges occur even in the case of senior bonds and loans when obligors are matched. Moreover, the FASB statement on the proposed fair v alue standards that reliability can be significantly enhanced if market inputs are used in valuation. However, because management uses significant judgment in selecting market inputs when market prices are not available, reliability will continue to be an issue (Bies, 2005) 6. RECOMMENDATIONS In order to provide more relevant information to financial statement users, fair value information should be reported for all financial assets and liabilities.Given that there are still some important conceptual and practical issues relating to the reliable determination of fair value, it is better to first require full fair value disclosures before contemplating a shift to full fair value recognition in financial statements. That would enable investors, creditor, preparer, auditors, and regulators to learn from experience. When the issues relating to the reliable determination of fair values are resolved, they will be ready for full fair value recognition in financial statements (Poon, 2004).T he author concords with the SEC recommendations, which are expected to impact the FASB’s future activities, including (a) improve fair value accounting standards (b) improve the application of existing fair value requirements (c) readdress the accounting for financial asset impairment s (d) establish formal measures to address the operation of existing accounting standards in practice (e) implement further guidance to foster the use of sound judgment of practitioners (f) address the need to simplify the accounting for investments in financial asset (Casabona & Shoaf, 2010).The first priority seems to be to work in close co-operation with users and preparers of financial statements to further consider the practicality of the proposals and to demonstrate or refute the relative merits of fair value and historic cost based reporting of financial statements for users’ analysis purposes. Such work should involve rigorous testing to consider how fair value information would b e used in decision models, as well as to stimulate the preparation of fair value information to understand better the extent of many of the practical concerns (Hague, 2002).Second, implementation of the proposals would provide more useful, relevant and transparent information about an enterprise’s use of financial instruments than is available today. The full benefits, however, will only be understood with careful study and education about how to use the new information. A somewhat different mindset and base of expertise (from that appropriate to traditional recognition and historical cost-based accounting for financial instruments) is also necessary. This includes integrating knowledge of certain finance and capital-markets concepts and practices with financial accounting objectives and concepts (Hague, 2001).Third, financial instruments should be grouped and displayed on the balance sheet based on the underlying characteristics of the instruments, such as unconditional righ ts to receive or obligations to deliver, and by major classes within these groups. Detailed, descriptive information about the nature and terms of these financial instruments, as well as management’s policies pertaining to them, should be disclosed in the notes to the financial statements in a manner consistent with the balance sheet (Anonymous, 2002). Fourth, fair values reflect point estimates and by themselves do not result in transparent financial statements.Hence, additional disclosures are necessary to bring meaning to these fair value estimates. FASB’s proposal take a first step toward enhancing fair value disclosures related to the reliability of fair value estimates. Additional types of disclosures should be considered to give users of financial statements a better understanding of the relative reliability of fair value estimates. These disclosures might include key drivers affecting valuations, fairvalue-range estimates, and confidence level (Yonetani & Katsu o, 1998). Finally, another important disclosure consideration relates to changes in fair value amounts.For example, changes in fair value of securities portfolio can arise from movements in interest rates, foreign-currency rates, and credit quality, as well as purchases and sales from the portfolio. For users to understand fair value estimates, they must be given adequate disclosures about what factors caused the changes in fair value (Bies, 2005). 7. IMPLICATIONS FOR FINANCIAL REPORTING AND MANAGERIAL DECISION-MAKING Several implications are drawn from this paper. 17 International Journal of Business and Social Science Vol. 2 No. 20; November 2011First, standard-setters and regulators would be required to provide more specific guidance on how to determine fair value for financial statements. Perhaps, they can list some common valuation techniques and indicate their appropriateness in various circumstances. Disclosure requirements would include disclosure of fair value of all financ ial instruments along with method adopted to determine fair values, any significant assumptions used in their estimation, some indications of the sensitivity of the estimated fair value to these assumptions, and discussion of risk exposure and issues associated with the estimation of fair value (Poon, 2004).Second, the role of external financial reporting is to portray an enterprise as if seen through the eyes of management—that is, that financial reporting should be consistent with internal management practices. It is, obviously, desirable that there be as much compatibility between the two as possible. However, it is difficult to see how accounting that is driven by the manner in which an enterprise chooses to manage its financial instruments and risks can provide information to financial statement users that are consistent and comparable between enterprises (Hague, 2002).Third, the objectives of financial analysis are to discern and assess the effects to an enterprise†™s performance and financial condition, including those that result from its risk management policies and decisions that involve financial instruments. In addition, financial statement users want to assess how well an enterprise effectively applies these policies in managing the risks of the enterprise. Therefore accounting and disclosure requirements related to financial instruments must be designed to explain (a) risks inherent in a given business (b) hedging strategies employed and (c) outcome(s) of such hedging activities.In other words, financial and nonfinancial disclosures should provide sufficient information for users of this information to discern and answer question, such as these: (a) what are management’s policies and procedures for using certain financial instruments? (b) How extensively does the enterprise use these financial instruments as part of its risk management? (c) What are the timing and the magnitude of the effects of the instruments on fair values in the balance sheet and changes in these values reflected in the income statement? d) How effective, or ineffective, are the position in these financial instruments as hedges in managing the risk exposure of the enterprise? And (e) what portion of the gains and losses reported in the balance sheet and income statement is realized and unrealized? (Anonymous, 2002). Fourth, the fact that management use significant judgment in the valuation process, particularly for level 3 estimates, add to the concern about reliability. Management bias, whether intentional or unintentional, may result in inappropriate fair value measurements and misstatements of earnings and equity capital.This was the case in the overvaluation of certain residual trenches in securitizations in recent years, when there was no active market for these assets. Significant write-downs of overstated asset valuations have resulted in the failure of a number of finance companies and depository institutions. Similar problem s have occurred due to overvaluations in nonbank trading portfolios that resulted in overstatements of income and equity. The possibility of management bias exists today. There continue to be new stories about charges of earnings manipulation, even under the historical cost accounting framework.It is believe that, without reliable fair value estimates, the potential for misstatements in financial statements prepared using fair value measurements will be even greater (Bies, 2005). Fifth, three fundamental goals of accounting that are likely to have influenced the choice of fair value accounting for all financial firms. One of these objectives is to minimize what is called management bias. Management has an obvious incentive to inflate the value of a company’s assets, and many ways to do it. Marking a company’s assets to market is an effective way of taking his element of financial statement manipulation out of management’s hands (Wallison, 2009). Finally, the opt ion to use fair value for certain assets and liabilities will provide more relevant information to the users of financial statements. However, since the fair value usage can be elected for some financial assets and financial liabilities and avoided for others, there is a loss of consistency in the financial statements between entities and even within a single entity. Also the new standard imposes additional disclosure requirements (Schneider & McCarthy, 2007). 8. CONCLUDING REMARKSCurrent methods of accounting for financial instruments have been of concern to accounting standard-setters around the world for some time now. These concerns about financial instruments start from the observation that markets now exists for either the instruments themselves or the various financial risks that arise from the instruments, and the availability of those markets enables entities to actively manage the financial risks and, thereby, to realize some or all of the market value of their financial i nstruments with ease. (Ebling, 2001). 18  © Centre for Promoting Ideas, USA www. ijbssnet. comIt has been argued that different conceptions of what is for an accounting estimate to be reliable underlie the fair value debate as it has taken shape in the last decade. The language of subjectivity and objectivity is unhelpful in characterizing what is at stake; it is more useful to focus on the question of how certain valuation technologies do or don’t become institutionally accepted as producing facts (Power, 2010). However, the shift in accounting principles will not come without some additional effort by all capital market participants, including preparers, auditors, regulators, and users of this information.It is realized that accounting and reporting based on fair value principles, in comparison with historical cost-based principles, require more extensive and detailed analysis of the methods and assumptions used to determine values recognized in the financial statements. This in turn, will require market participants to redesign the current financial reporting model and to educate themselves in the application of these new principles. Nonetheless, transparency of the true economic consequences, i. e. isks and rewards, resulting from the use of financial instruments justifies the movement to a fair value based model for financial reporting (Anonymous, 2002). Certainly, mark-to-market reporting has its drawbacks, especially for derivatives. First, fair value based on market prices can be difficult to determine for complex and lightly traded instruments. These types of derivatives are the level 3 type mentioned above. These derivatives are usually measured using a mark-to-model process, which can be arbitrary at best and fraudulent at worst.Next, there is the theoretical issue, as banks successfully argued, as to whether market price does indeed represent fair value. Also, the relevance of market prices can be challenged with respect to intent. Some ob servers challenge the relevance of market prices because they believe that, if government officials do not intend to trade derivatives but rather hold them to maturity, as is usually the case with derivatives used for hedging, then the time and expense of determining fair value may not be worthwhile.Still, using fair value accounting is proper for derivative reporting because it enhances the following qualities or objectives of financial measurement and reporting: accountability, transparency, consistency, inter-period equity, and risk management (Metzger, 2010). REFERENCES Allatt, G. (2001). Fair value accounting: Examining the consequences. Balance Sheet, 9, 22-26. Anonymous (2007). Statement of financial accounting standards No. 159: The fair value option for financial assets and financial liabilities. Journal of Accountancy, 203, 96-101. Anonymous (2002). Financial instruments: Fair values and disclosure.Balance Sheet, 10, 12-20. Bath, M. (2006). Including estimates of the futur e in today’s financial statements. Accounting Horizon, 20, 271-286. Barth, M. & Landsman, W. ( December, 1995). Fundamental issues related to using fair value accounting for financial reporting. Accounting Horizons, 97-107. Bies, S. S. (2005). Fair value accounting. Federal Reserve Bulletin, 91, 26-30. Casabona, P. & Shoaf, V. (2010). Fair value accounting and the credit crisis. Review of Business, 30, 19-31. Chambers, A. ( March, 2008). How do you mark to market? Euromoney, 1-3 Ebling, P. (2001). Fair value accounting: Breaking a butterfly upon a wheel?Balance Sheet, 9, 22-27. Elifoglu, I. H. , Fitzsimons, A. P. , & Lange, G. A. (2010). FASB proposal clarifies fair value measurement and disclosure. Commercial Lending Review, 75, 42-48. Hague, I. (2001). Fair debate for fair value. CA Magazine, 134, 47-49. Hague, I. (2002). Fair value for financial instruments: Where to next? Balance Sheet, 10, 8-12. Lipe, R. (2002). Fair value debt turns deteriorating credit quality into pos itive signals for Boston Chicken. Accounting Horizons, 17, 169-181. Metzger, L. (2010). Mark to market governments. The Journal of Government Financial Management, 59, 16-20. Poon, W. W. (2004).Using fair value accounting for financial instruments. American Business Review, 22, 39-44. Power, M. (2010). Fair value accounting, financial economics and the transformation of reliability. Accounting and Business Research, 40, 197-211. Ryan et al. (2002). Reporting fair value interest and value changes on financial instruments. Accounting Horizons, 16, 259-268. Schneider, D. K. & McCarthy, M. G. (2007). Fair value accounting broadened with FAS-159. Commercial Lending Review, 45, 28-36. Sinnett, W. M. (2007). New fair value standards stress HOW not just WHAT. Financial Executive, 23, 33-36. Wallison, P. J. (2009).Fixing fair value accounting. OECD Journal on Budgeting, 9, 99-105. Yonetani, T. & Katsuo, Y. (1998). Fair value accounting and regulatory capital requirements. Economic Policy Rev iew, 4, 33-44. Zion, D. , Varshney, A. & Cornett, C. ( June, 2009). Focusing on fair value. Credit Suisse Equity Research, 4, 18-20. 19 Copyright of International Journal of Business & Social Science is the property of Centre for Promoting Ideas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.

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Captain My Captain by Walt Whitman Essay This poem filled my mind with great memories snd make think of my loved ones who are now Angels. I am still feeling the connection. In my opinion, I can say that peopleare physically dead be we can keep them in our mind alive as long as we want them to be part of our lives. Father and I had different character. We had the same interest such as reading, watching news, assisting on conference-debates. We had the same taste but we were hardly shared our opinion. This was because of me, I was very shy when I was a teenager. That makes our relationship† very special† and I miss it deeply. We did many things together that help us to become good friend such as driving. When I was 19 year old, my captain taught to drive and new situations always make me bit nervous, and my first drive was no exception. Things were not quite easy for me, but my captain was very patient. This driving session brought us very close to each other because I could not avoid him like I used to do before. I had at least 6 hours a week for my driving lesson. My late father there for me every time I needed him. When I started the University, he was driving me to school like a little girl who starts a kindergarden. I was not the only child in the house but I was so special. Life then was stress free because everything has been taking care of me. My only sadness is that my son will never meet his grandfather spending time together, playing around, but I know even from Heaven he is watching over us. He is now my angel and he is very proud of me because I am following his paths.

Miley Cyrus Essay Example for Free

Miley Cyrus Essay Miley Cyrus has always been an important figure to me and to my identity. I begun my teenage years watching Hannah Montana every night before going to bed, listening to her songs as both, Miley and Hannah and I even used to learn the lyrics to every song that eventually helped me a lot to improve my english speaking skills. I also had Hannah Montana room appliances, posters and even my bedding was from the famous show. As I see these pictures and also videos, followed by all the comments that are being posted about her everywhere from Youtube to Twitter and from Facebook to many gossip magazines everywhere I look. I feel hurt and I cannot imagine how much pressure she must be feeling at the moment. We live in a world that still doesnt know how to appreciate and is full of hate that doesnt go away easily. Personally, I don not have a problem with what she is doing, but I am really curious, I cannot understand how a person could change not only her appearance, her way of dressing but also her personality from night to morning. I do not dislike who she is now, though I find it disturbing how being a role model to so many young girls she really doesnt care about dancing in front of everyone in such an obscene way or posting pictures on her personal Instagram consuming drugs, for instance the picture where she is smoking a joint of weed. Girls that are still young and even older ones can totally follow these actions and do the same just because their idol is doing it, so in this way I dont think she is doing the right thing. As long as I know, Miley did not have many cheerful times, the last six months of her busy life. She struggled with many aspects of her personal life, just like we all do from time to time. Perhaps she did not know how to manage this in a different way so she decided to make a drastic change. Comparing the two pictures, the first one where her hair is long, she wears an acceptable dress and she smiles sweetly, the other picture below that one was at this years VMAs and she is looks so much more outrageous, her hairstyle completely change, she went from long, brunette to short very light blonde hair. She also changed her clothes and it seems that showing skin is something that makes her feel better, she does not smile but she pulls her tongue out of her mouth and makes signs with her hands. I understand her at this point because as a teenager, I feel how pressure starts to accumulate more in life everyday as I grow older, it is not easy to deal with everything, to find a balance in life. Sometimes things dont go very well or as planned, I get hurt, we all get hurt and we have to learn from mistakes but sometimes I want to be someone else, I want to change who I am and feel different, new and refreshed. From one side, I truly admire the way she reacts to the situation. She is being so critiqued on every move she does, everything she does will be known because she caused so much polemic that way too many people are just on her feet and will not stop wanting to see and know what she does. The media follows her, portrays her in a negative way and she does not care, because she feels happy doing whatever she wants and being different. Cyrus has already spoken many times to the public answering to the publics negative response and the way she answers its been so confident that it is very impressive. I think I have much to learn from her, not from the obscene dance moves and the lack of clothes in public. Instead, learn from the attitude she has taken and how strong she is by not letting comments and people bring her down.

Are Criminals Born Or Made At Birth Criminology Essay

Are Criminals Born Or Made At Birth Criminology Essay What causes or contributes to criminal behaviour within an individual is very difficult to explain because there are many different theories around this issue. Some scientist such as Cesare Lombroso which begun Scientific Criminology believed that individuals are biologically predisposed to criminal behaviour (Male Crime and Deviance pg.5).Later others followed such as Ernest Hooten and William Sheldon which differentiated criminals from non criminals from certain feature such as mixed coloured eyes or reddish hair.( Male Crime and Deviance pg.6). Although these theories where discredited because of prejudices and methodological weakness it led the way to other forms of theories such as the heredity -Genetic theory , the XYY Chromosome theory, and brain and neurological dysfunction theories . Other researchers do not believe that criminal behaviour is derived biologically, they believe that things like a persons cultural surrounds, their genes and their environment predisposes them t o criminal behaviour. As a result criminals, these researchers strive to prove that individuals are a product of their environment and surroundings. Therefore the main purpose of this essay is to draw from certain theories to assist in explaining the fact that individuals are biologically predisposed to criminal behaviour. The thought that individuals were born criminals originated in nineteenth century Italy, with Italian physician Cesare Lombrosos book entitled LUomo Delinquente. Throughout his book he discussed scientific criminology which was influenced by Charles Darwins theory of evolution (Male Crime and Deviance pg.5). Lombroso proposed that some people were biologically predisposed to criminal behaviour or born to commit crime, he also believed that criminals were products of atavism or biological throwbacks to earlier genetic forms (Male Crime and Deviance pg.5). Concept of Atavism Lombrosos general theory suggested that criminals are distinguished from noncriminals by multiple physical anomalies (CBS Interactive Inc 2010).For his examination he used Italian prisoners and army personnel. He advanced that criminals and noncriminal could be differentiated by physical stigmata-such as large lips, flat nose, and certain shapes of the skull-as well as such preferences as tattoos or involvement in orgies (Male Crime and Deviance pg 6). Although his theory was later rejected it led to different physicians such as Ernest Hooten who began to expand on Lombrosos scientific criminology theory. He attempted to explain male criminality by using body type theories in his 1939 book entitled Crime and the Man. Which explained that criminals could be indentified by mixed eye colour, reddish hair also that tall heavy men were most likely murders (Male Crime and Deviance pg.6)? William Sheldon soon followed in 1940 when he systematically showed a correlation between body type and juvenile delinquency (Male Crime and Deviance pg. 6). He describes three body types which were endomorphics, ectomorphics and mesomorphics, which each related to a certain personality or temperance trait. Mesomorphics were characterized as muscular, hard, assertive, aggressive, and active. These types were believed to be the most likely to participate in crime (Male Crime and Deviance pg. 6). Although all of thes e theories were later rejected because of methodological weaknesses they opened the door to many other theories regarding biological criminality Theories such as the heredity -Genetic Theory, the XYY Chromosome theory and also Hyperactivity and Antisocial behaviour theory support the fact that individuals are biologically predisposed to crime. They also differentiate from past theories because they are scientifically based rather than bias and racist. For example the heredity genetic theory supported by biological theorists such as Richard Dugdale and Henry Goddard explain that male crime and abnormal behaviour are due to the genetic transmissions of certain mental or physical characteristics from generation to generation (Male Crime and Deviance pg.6). While other researchers found that certain biological characteristics such as low birth weight and other prenatal problems predispose some children to delinquency and criminality. Therefore making it clear in this theory that some i ndividuals have certain biological characteristic that make them immune to criminal behaviour. The XXY chromosome theory is different from the heredity -Genetic theory, but it also supports the fact that criminals are born and not made. Researchers have discovered a genetic abnormality in some males, where as the normal chromosome count for a male is XY some males had an extra Y (XYY) which was found to be associated with aggressive and violent behaviour (Male Crime and Deviance pg. 9) Among many other theories there is also the brain and neurological dysfunction and their effects in behaviour. Some research has found abnormal electroencephalogram (EEG) recordings of brain activity in criminals and delinquents, associating it with violent and aggressive behaviour, destructiveness, limited impulse control, and weak social adaptations. (Male Crime and Deviance pg.11)Also persons diagnosed with ADHD have been found to be at risk for a number of deviances and abnormal conditions including delinquency, criminality, feelings of worthlessness, psychiatric morbidity, unemployment, fam ily dysfunction, and suicide (Male Crime and Deviance pg. 11).Among many other theories these help explain alternative roots of the problem involving criminals. While there are many theories that support the fact that individuals are born into criminal behaviour, others do not believe that this is a valid answer .Therefore contribute criminal behaviour to other factors such as sociological, genetics and biological theories. In terms of sociological theories there are many different theories, for example the social reaction theory which is also known as the Labelling Theory conducted by Howard S. Becker in 1963. It explained that when a person commits a crime they will receive the label of a criminal, and when a person is labelled as such by society they are likely to accept this label as part of them. Now that the person now thinks of themselves as a criminal they will continue their criminal behaviour (Zomba Inc 2010). Although this theory is a very good theory, it does not really hold up because unlike biological theories which discuss the root of the problem this theory does not . Reason being that the theory neglects the process of becom ing defiant in the first place, the act of primary defiance. It does not do a good job at describing the primary part of deviancy such as murder, which is often a primary example of classic defiance (Arasite 2010). Among many of those theories there is also the differential association theory which was supported by most criminologist and socialist, this theory states that crime like crime like other kinds of behaviour, is learned. The theory points out the general conditions under which there are likely to be more than less criminal behaviour learned and thus a greater likelihood that the person will acquire a set of definitions that are more favourable to criminal activities than noncriminal ones. Furthermore, the theory states that criminality is a social rather than antisocial activity (Male Crime and Deviance pg.27). Although this is an excellent theory which tried to explain criminal behaviour there are many shortcomings, one is its inability to be validated through empirical testing because of a lack of clarity in its definitions and terminology. Also it failed to explain the origin of crime and delinquency or outline the nature of the learning process Male Crime and Deviance pg.27). While some theorists focus on sociological theories to explain crime and criminals other focus on the genetics revolving around this issue. One example of this is the Testosterone and Male Offending theory. Much of the research has found a positive correlation between high levels of testosterone, male violence, and aggressive behaviour. Early studies focused on testosterone in prisoners. L. E. Kreuz and R. M. Rose found that levels of testosterone were significantly higher in offenders with a history of violent behaviour than offenders whose histories were nonviolent (Male Crime and Deviance pg. 10). Although this is a fine theory it failed to find a concrete correlation between testosterone and criminality. There is also the Machismo and Males theory which is an important concept in masculinity and its relationship to male violent and aggressive behaviour. Machismo has been particularly associated with the criminality of Latino men. Many experts attribute their victimization and sexual abuse or the macho male, suggesting that violence against women is more likely to be a product of machismo-oriented cultures than cultures that favour more equality of the sexes (Male Crime and Deviance 34).therefore Machismo appears to be rooted in Hispanic communities sense of family and cultural isolation. Although some believe that criminals are manufactured by genetics and society, others believe that criminals are a product of their environment which includes such things as poverty, education, parenting practises and family structure. Many studies have been conducted that believe that the percentage of poor Americans who are living in extreme poverty has reached a 32-year high (Christian Association for Prison Aftercare 2010). This is defined as individuals living at half of the federal poverty line. Sociologist and criminal justice scholars have found a direct correlation between poverty and crime. Therefore it is believed that individuals resort to crime only if the cost or consequences are outweighed by the potential benefits to be gained.  Ã‚   The logical conclusion to this theory is that people living in poverty are far more likely to commit property crimes such as burglary, larceny, or theft (Christian Association for Prison Aftercare 2010). Although this theory may be true it does not relate to everybody, therefore there are many short comings, and much controversy among this theory. While some scholars believe this theory to be true others believe that poverty does not have a causal relationship to crime because there are countries in which poverty is very high but the crime rate is relatively low (Christian Association for Prison Aftercare 2010). There are many other theories among them is the child abuse and neglect theory, which is the relationship between child abuse, neglect, delinquent and serious or violent criminal behaviour has been strongly documented on the literature. The act of being violated gives these vulnerable young people a street-ready repertoire of violence; they know how to kick because they have been kicked, they know how to stab because they have been stabbed, they know how to torment and humiliate because they have experienced the same (Telegraph Newspaper 2008). For example Brandt Steele cited research in which more than 80 percent of the juvenile offenders had a history of being abused, with 43 percent recalling being knocked unconscious by a parent. Martin Haskell and Lewis Yablonsky held that juvenile detention facilities are filled with offenders who were victims of child abuse. Similarly, self report data on prisoners indicate a high percentage had been physically or sexually abused during childh ood (Male Crime and Deviance pg.42). In spite of this persuasive associated between child abuse and deviant behaviour, not all researcher agree that the two are necessarily interrelated (Male Crime and Deviance pg.42). Factor or reasons for delinquency and crimes are often very difficult to explain because there are many different theories and concepts around this issue that each takes a different stand. Some scientist such as Cesare Lombroso believed that some people are biologically predisposed to criminal behaviour (Male Crime and Deviance pg.5). His theory although filled with weakness gave the ground for other theorist to follow but also put their own spin on it such as Ernest Hooten and William Sheldon. Although these theories where discredited because of prejudices and methodological weakness it lead the way to other forms of theories such as the heredity -Genetic theory , the XYY Chromosome theory, and brain and neurological dysfunction theories . Although these theories may be very convincing other researchers did not believe that criminal behaviour was derived biologically. They believed that things like a persons cultural surroundings, their genes and their environment predisposes them t o criminal behaviour. Therefore the main purpose of this essay was to draw from certain theories to assist in explaining the fact that individuals were biologically predisposed to criminal behaviour

Interpretations Of Frost :: essays research papers

Interpretations of Frost Green foliage rests on an old stone wall, which an aged man leans against for inspiration. Beautiful verses ripple through his mind, ready to pour out of his hand to make a poetic masterpiece. This man is Robert Frost, and although the scenario is fictional, it would not be unheard of for the New England native. Robert Lee Frost was one of America's leading 20th-century poets and a four-time winner of the Pulitzer Prize. An essentially pastoral poet often associated with rural New England, he wrote poems whose philosophical dimensions transcend any region. Although his verse forms are traditional--he often said, in a dig at archival Carl Sandburg, that he would as soon play tennis without a net as write free verse--he was a pioneer in the interplay of rhythm and meter and in the poetic use of the vocabulary and inflections of everyday speech. His poetry is thus both traditional and experimental, regional and universal. After his father's death in 1885, when young Frost was 11, the family left California and settled in Massachusetts. Frost attended high school in that state, entered Dartmouth College, but remained less than one semester. Returning to Massachusetts, he taught school, worked in a mill and as a newspaper reporter. In 1894 he sold "My Butterfly: An Elegy" to The Independent, a New York literary journal. A year later he married Elinor White, with whom he had shared valedictorian honors at Lawrence High School in Mass. From 1897 to 1899, he attended Harvard College as a special student but left without a degree. Over the next ten years he wrote (but rarely published) poems, operated a farm in Derry, New York, and supplemented his income by teaching at Derry's Pinkerton Academy. In 1912, at the age of 38, he sold the farm and used the proceeds to take his family to England, where he could devote himself entirely to writing. His efforts to establish himself and his work were almost immediately successful. A Boy's Will was accepted by a London publisher and brought out in 1913, followed a year later by North of Boston. Favorable reviews on both sides of the Atlantic resulted in American publication of the books by Henry Holt and Company, Frost's primary American publisher, and in the establishing of Frost's transatlantic reputation. The Frosts sailed for the United States in February 1915 and landed in New York City two days after the U.

Free Gullivers Travels Essays: Hypocrisy in Government Exposed :: Gullivers Travels Essays

Free Gulliver's Travels Essays - Hypocrisy in Government Exposed Corruption of political systems in one of the primary themes in Gulliver's Travels. This corruption is a result of selfishness as well as the inability to see things from any other perspective rather than one’s own. The first voyage of Gulliver takes him to the isle of Lilliput. There, he must play to a petty and ineffectual government. Swift uses several devices to highlight the Lilliputian stupidity. First, they are physically agile and graceful in comparison to Gulliver, who is portrayed as cumbersome and brutish. When I found myself on my Feet, I looked about me, and must confess I never beheld a more entertaining Prospect. The Country round appeared like a continued Garden, and the inclosed Fields, which were generally Forty Foot square, resembled so many Beds of flowers. These Fields were intermingled with Woods of half a Stang, and the tallest Trees, as I could judge, appeared to be seven Foot high. I viewed the Town on my left Hand, which looked like the painted Scene of a City in a Theatre. This passage is quickly followed by one expressing Gulliver's needs to "disburdenth" himself: I had been for some Hours extremely pressed by the Necessities of Nature; which was no Wonder, it being almost two Days since I had last disburthened myself. I was under great Difficulties between Urgency and Shame. The best Expedient I could think on, was to creep into my House, which I accordingly did; and shutting the Gate after me, I went as far as the Length of my Chain would suffer, and discharged my Body of that uneasy Load. By setting up this contrast (it is interesting to point out that this is the only time that Swift makes any reference to Gulliver's "needs") the reader begins to expect the Lilliput to have a higher form of society. When, later in the book (that is the first book of four), the Lilliputians show their true selfish nature it is more of a surprise to the reader because of the great buildup. The very fact that this book is put into an adventure format is to lull the reader into believing Gulliver... of course, because Gulliver is Gullible this takes the reader straight to insanity at the end. Swift challenges the reader to make their own decision by taking them from right to wrong and asking them to, at some point, begin disagreeing with Gulliver.