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As many of you will recall, several years ago General Motors Corporation and Standard Oil Company (New Jersey) each sold their 50% holding in Ethyl Corporation at a gain of about $75 million. General Motors accounted for the gain as part of income while Standard Oil credited the gain directly to net worth. Each chairman of the board was called on at their respective stockholders' meetings to explain their accounting for the gain. Each chairman attempted to justify his respective treatment in terms of being "consistent with company policy" or that it would give a ''more realistic income picture" etc. Shortly after this incident, I recall talking to Dean Sidney Davidson and he commented that the respective chairmen should simply have responded to their shareholders that the treatment of the gain was not important since it was not a material amount! After all, for Standard Oil, which had the smallest net income after taxes of the two companies, the gain was only about 9% of that net income figure. Now, Rose et al. have shown that the change in intensity of stimulus needed before it can be detected is not only a constant but is about 6.5%. I'm certain that there are reasons for this research other than to prove that Dean Davidson was right in his 1962 statement but it would be a nice side benefit if the researchers could manage to achieve results slightly closer to 9%! My comments are primarily aimed at evaluating the researchers' approach to the problem of materiality. It is premature to evaluate the specific research findings since we are presented with the results of only one set of experiments; much more can and should be done. Efforts of this

Since about 1950, the controversy over full vs. direct costing has generated a voluminous literature' largely aimed at the relative merits of each (1) for external financial reporting purposes or (2) for internal use in management planning and control.2 The arguments rest on the assumption that each method produces different results; obviously if each method produced exactly the same results then controversy is idle. The analyses to date have largely ignored the effect of the inventory costing method. A typical discussion of the generalized conditions which create differences between direct and full cost profit is: "When production exceeds sales (i.e., in-process and finished inventories increasing), absorp