Discussion of LIFO and the Diffusion of Innovation

Abstract

My effort to capsulize this paper produces the following statement: Copeland and Shank have used empirical data developed by Copeland and Wodj ak for purposes other than theirs, related to a special, if not unique, accounting technique, to document their failure to confirm their interpretation of Tritchler's suggestion of a degree of applicability of Rogers' suggested list of contributors to the diffusion of innovation for explaining the process by which accounting methods get adopted. Now-some more specific observations. The authors' several pages of supplementary comments deal with two natural points of concern, but I do not think they are the most significant of the several areas of vulnerability, so I will concentrate on others. (1) It appears that some confusion exists as to just what is being attempted. The authors state that they are testing alternative to the view that economic variables alone can explain the adoption of innovation. At another point in their article they say they are testing to see if the theory is really useful in explaining the adoption of accounting changes. There is a difference in these two purposes, I believe. The approach used is not good for the latter purpose, yet it is the purpose in most need of examination since the former has already been done to a substantial extent. (2) The authors state that their paper reconsiders the relevance of the diffusion of innovation as an explanatory model of changes in accounting method. I seriously doubt that any single example of an accounting change could shed much light on this question. And even if it could, LIFO is a very poor choice. I realize, of course, that it happened to be the example on which they had some data. LIFO is a very poor example because of its clear income tax effects and the overwhelming economic or