Working Paper 300
Draft Version on January 3, 2000
Bob Jensen at Trinity University
Reader suggestions by Email are welcome at 


Clyde Gives Brother Hat a Lesson in Arbitrage
Dedicated to Professors Bill Breit and Ken Elzinga

Scene 1

Scene 2

Scene 3

The Lesson to be Learned

Accounting Issues and Controversies

A Tribute to Bill Breit and Ken Elzinga

Accounting Mystery Novels

The Genesis Modification by Peter Kruger

Technical terminology used in this production is defined at  


Scene 1 (December 31, 1999)

Scene 1 takes place inside the Cats Meow Club in San Francisco (not to be confused with the Cats Meow in Smithtown).  The theme at the Cats Meow Club is "Christmas Every Night."  A frog is on stage strumming on a guitar on a stage covered with artificial snow and fake fir trees.  He's singing the familiar Frog Went A-Courtin'.

Molly Mouse was a hat check girl --- W'woo W'woo!
Molly Mouse was a hat check girl --- W'woo W'woo!
Molly Mouse was a hat check girl
He thought he'd give this chick a whirl --- 
             W'woo W'woo, W'woo!

He sauntered up to Molly Mouse's side --- Uh Ugh!
He sauntered up to Molly Mouse's side --- Uh Ugh!
He sauntered up to Molly Mouse's side
And whispered Molly will you be my bride
              Uh Ugh, Uh Ugh, Ugh?

Not without my Uncle Rats' consent --- Ugh Uh!
Not without my Uncle Rats' consent --- Ugh Uh!
Not without my Uncle Rats' consent
I wouldn't marry the President
              Ugh Uh, Uh Ugh, Uh Ugh!

That's it Clyde, better hit the road --- Goodbye!
That's it Clyde, better hit the road --- So long!
That's it Clyde, better hit the road
You ain't no frog, you're a horny toad
               Goodby, So long, Farewell!



Scene 2 (January 2, 2000)

On the 48th floor of an office building in downtown San Francisco, a frog made out of green velvet and red satin (lining the frog's mouth) is carried by a buxom blonde into a room paneled in mahogany with in inlaid teakwood.  The blonde has abnormally short limbs and stubbed nose that resembles a snout.  On the room's walls there are rows upon rows of hat pegs holding up hats of style imaginable.  This is the magnificent office of an attorney at law named Hat A. Felt.  Mr. Felt is the hand puppet frog who manages the Jim Henson Charitable Foundation Trust.  The only Muppet picture on his desk is an autographed photo of Miss Piggy.  She's his Muppet favorite.  Mr. Felt, who always wears a hat,  refuses to have Kermit's picture in sight due to being green with envy of Kermit.  


Hello brother.

On my gosh --- not you again Clyde!  When are you going to get it into your empty head  that I am not your brother?

As the saying goes, we were, heh heh heh,  "cut from the same cloth."  And we had the same mother.


A seamstress is not a mother to everything she sews.  Mrs. Tamm also sewed for Fruit-of-the-Loom.  I suppose that makes you kin to hundreds of pairs of men's briefs.

I thought I made it perfectly clear that Mr. Henson's Foundation Trust cannot, by its very charter, give out any money to swatches of cloth.   In the height of their popularity, none of the famous Muppets received a salary or cars  or yachts or whatever.  Muppets are nothing but glorified rags.


Mr. Henson's Foundation Trust pays your salary and the wages of that nest of porkers out front in your office.  


Look here Clyde, don't get flip with me,  or I'll . . . I'll have you pinked shear-wise!  I rose above the rest of you mop heads.  I earned a law degree.  That's what qualifies me to manage Mr. Henson's Foundation.


It's got to be a phony diploma.  How can a hand puppet be an attorney at law?


I earned a legitimate and highly respected law degree from the Concord School of Law.  When you take your courses in a distance education program, there's no discrimination based upon race, creed, or fabric of origin.  All Concord wants is ability, motivation, and performance.  I passed the California Bar on the first try.

You have my utmost sympathy Clyde.  I am truly sorry that Mr. Henson passed us both over in favor of Kermit.  But that was years and years ago.  You've survived quite well doing your Kermit imitations in cabarets in Europe, Asia, and the North America.  If its any consolation, Mr. Henson never paid Kermit and the other Muppets one red cent over all those years.  He left each of them without a car or a house or a suit of clothes.   Kermit was not particularly happy about that, but he did comprehend what I cannot seem to hammer into your empty head Clyde.  The charter of the Foundation Trust is very explicit about what I'm allowed and what I'm not allowed to do with the Trust Fund's invome.  Muppets don't get one farthing . . . except for me that is.  Please go away Clyde!  You'll live.  Just open wide --- zillions of bugs and rain drops are free goods to frogs.


Hold on . . . please hear me out!  Unlike those other times I proposed investments to you,  I studied up on finance this time --- I've got this neat idea . . .


Hat: (interrupts)
This must be what Yogi Berra meant by dejavu all over again.  We keep having this same conversation over and over again since Mr. Henson died.  First you wanted a cashmere sweater --- just why I'll never know.  Cashmere shrinks in a frog pond.  Come to think of it, so would you Clyde.  Then it was water skis and a speed boat.  You've got your own flippers Clyde, you don't need a power boat.  Next it was for a useless bug strip --- when you've already got a sticky tongue.  Just  for the record Clyde, what is it this time?


A bow tie --- just one geasly bow tie that costs five bucks.


I'm almost afraid to ask.  Why does a frog need a bow tie?


Wehll'l . . . if you must know, I've got my eye set on Molly Mouse --- the hat and coat checker at the Cats Meow Club down on the wharf.  Here's my dilemma.  A naked guy can catch the eye of a girl, but just try getting that first date.  Molly always blushes and whispers "hit the road toad." 

If I had this bow tie it'd . . . well it would be like I've got more class --- formal wear so to speak.  Plus, to do it up right, I need another $9,995 for a set of wheels --- one of those classic Mouse Mobiles with the cheesy seats.


The answer is still NO --- not even the five bucks for the bow tie.  Do I need to spell out N-O for you Clyde?


Jeez Brother Hat --- just hear me out.  All I want is a loan to do this arbitrage thing.  You'll get all the money back with interest risk-free.  It's not a gift that I'm requesting this time, only a sure-thing, risk-free loan with 12% interest guaranteed by a major celebrity.


Risk-free arbitrage?  Ha!  You'd think I was dumb enough to be born with hair.  Sounds like a gamble to me.  Who's the celebrity . . . Jimmy the Greek?"


That's the whole point Brother Hat.  There's no risk in arbitraging.  An arbitrager goes into arbitrage deals naked, like me, without one penny to his or her name.  With an arbitrage strategy you can't lose, and there's a chance to win big dough without any risk of losing what you don't have.


If you don't need one red cent to arbitrage, why are you here begging me for a loan of one million cents?


I should've said it's possible to go into it, at least in theory, without one penny and a strategy of a short sale combined with a forward contract to purchase at a fixed price.  But in reality, I could not find that particular alternative for my deal.  However, I worked up this so-called cash-and-carry arbitrage deal where I can buy something and enter into a forward contract to sell the item in a year at a fixed, risk-free price.

To take the risk out of market price movements, I need to cover myself by owning the item all year.  All I need is a loan to buy the item at spot market price today after I sign a forward contract that has virtually zero risk of default.  You loan me $10,000 today and, in one year, you get back $11,200 risk-free.  You can't make a 12% return in Treasury Bills.


And just what is this so-called "item" that you intend to buy.


A carload of pigtails.


Pigtails --- this has got to be a really stupid joke.  I suppose you would ask me to wear my hair in a pigtail --- that is if I had any hair.


Not hair-style pigtails --- I mean pickled pigtails.  For decades there've been trading markets for pork bellies and pickled pigs feet.  I got this tip that a new trading market for pickled pigtails has just started up in Beijing.  There will soon me a whole new raft of commodities markets as China moves toward a capitalist economy.  Pickled pigtails will soon be the rave alongside pigs-in-a-blanket at cocktail parties.  Someday they will even be dried and sold in bags alongside potato chips.

Margins are very thin when arbitraging in established commodities such as pork bellies.  But new markets like pigtails offer terrific, fast-paced arbitraging opportunities that only turtles would let slip by without making a killing. 


Now I've really heard enough --- it's more of your snake oil Clyde.  Sending $10,000 to the China pickled pigtails market is not exactly what I call a risk-free loan.  Try NO on for size!


There's also a French market!


French what?


Candice Bergen lives in France.  She's fond of puppets --- having grown up with the likes of that stuffed shirt Charlie McCarthy and the other one . . . that Mortimer Snerd blockhead.  Ms. Bergen
doesn't gamble as a rule, but she's willing to take a speculative position on one carload of pickled pigtails to be produced and sold in China.   That way she can lend a helping hand to the Chinese and to a down-and-out puppet.

But, as in all arbitrage deals, we've got to get her to sign a forward contract with lightening speed before another arbitrager thinks along these same arbitrage opportunity lines.  Don't you dare leak what I just told you to Kermit.  Candice Bergen will only take on one puppet's forward position in pigtails.   I've got to move on this deal today!

Here's how my arbitrage strategy will work.  You loan me $10,000 at 12% per annum.   First I take a forward position to sell Ms. Bergen a carload of pickled pigtails after one year at a strike price of $21,200.   Let's call that the French forward market.

 Next I buy a carload of pickled pigtails at today's spot price of $10,000.  Let's call that the China spot market.  What I am proposing is called a cash-and-carry arbitrage strategy between the China spot market and the French forward market.  It's a risk-free hedge where I lock in the difference between $21,200 and $10,000.


Go on --- why would Candice Bergen pay $21,120 for something she can buy today for $10,000?  Even more to the point, why would she want a carload of pigtails?


Well the first thing is that she does not want delivery of the pigtails anymore than most buyers and sellers on the Chicago Mercantile Exchange want pork bellies dumped on their front lawns.  Ms. Bergen is taking a forward speculative position that can be netted out in cash rather than pigtails.

The second thing is that Ms. Bergen does not know our mutual friend Yi-Jing in China.  You remember Yi-Jing.   She's that hand puppet that once lived in San Francisco's Chinatown.  Now she's back in China and is willing to cut a deal to get me a carload today at a discounted spot price of $10,000.  That's what I am calling my China market.  The French market does not know about my China market.

Arbitraging is built upon the assumption that two or more markets are inefficient --- like when prices of commodities or foreign currencies are temporarily different in one trading market (say in France) versus another trading market (say in China). 

In fact, arbitragers are crucial to keeping markets efficient.


So let me get this straight.  I loan you $10,000 at 12%.  You buy a carload of pickled pigtails at today's China market spot price of $10,000.  In one year, a famous multimillionaire, Candice Bergen, is willing to pay you $21,120 for a carload of pigtails in a French forward price market.  When she makes good in one year's time on her forward contract by buying a carload of pigtails from you, she may make a speculative profit if the spot price soars above $21,200 and a loss if the spot price plunges.  If she loses, its charity, and if she wins its a good investment.

You are implying that my only risk only seems to be the forward contract credit worthiness of Candice Bergen.   I'm willing to concede that her credit rating is probably AAA.  Nevertheless, with you Clyde, I'm still suspicious . . . there's another risk hidden here.  Suppose your carload of pickled pigtails in China goes sour --- salmonella poisoning or whatever?


Yi-Jing is not really selling me an actual carload of pigtails to store for one year.  She's using the $10,000 to buy title to a carload.  It's like putting 10,000 paper dollars into a bank account.  The bank does not physically keep those particular dollars in a safe deposit box.  The bank simply gives you credit in your account for $10,000.  Then when you withdraw any or all of your money, you get new dollar bills or blank checks that can be filled in and spent elsewhere.  You don't have to worry about mold and mildew or salmonella destroying your original dollar bills on deposit.  Think of my carload as just a blank check to be filled in for one carload pigtails is in a year's time no matter what the spot price is at that time.  After one year, I  endorse my title to a carload of pigtails to Candice Bergen.  She closes out the French forward contract with a cashier's check to old Clyde for  $21,200.  In return, Candice Bergen sells the title to the pigtails for whatever the spot rate is on the day of the China exchange.  If the spot rate soars to, say, $26,200 she clears a $5,000 profit.


So why should I put faith in an account with this Yi-Jing woman who ends up with my $10,000?


Yi-Jing will open an account with the Chinese Commodities Exchange thereby obtaining the full backing of the Chinese Government.  I think the risk of default in this deal is nill considering that we are dealing with Candice Bergen on one end and a major government seeking more respect in the global economy.


So in summary, if you get this forward sales contract in the French market where Candice Bergen will pay you a strike price of $21,200 after one year.   You take the $10,000 I loan you today and get title to one carload of pickled pigtails at today's spot rate in the China market.

After one year, you close out all contracts and pay me back $11,200 for my loan to you and take a $10,000 arbitraging profit for yourself to buy a $5 bow tie and a $9,995 Mouse Mobile.


You got it.  Now let's not waste any more time Brother Hat.




What do you mean no?  This is a virtually risk-free arbitraging strategy.


Try the other approach you mentioned to me --- the one that does not entail needing a loan from me.  Sell the pigtails short to Ms. Bergen for $20,000, pigtails to be delivered on one year's time, and enter into a forward contract to by pigtails for $10,000 one year from now.


Yi-Jing won't write a forward purchase contract.  She insists on getting the $10,000 today --- with real Yankee dollars on the barrel head.  Yi-Jing does not know anything about Candice Bergen's French market, and Yi-Jing certainly knows better than to accept a note receivable from a penniless frog.   I could work this deal out without your help if Ms. Bergen would pay me today.  But Candice Bergen does not want to pay anything for a year.  When dealing at spot rates in China, Yi-Jing demands the money today and Ms. Bergen won't pay today.

Yi-Jing might accept a note receivable if she knew about Candice Bergen.  But if she new about Candice Bergen, Yi-Jing would most likely cut me out of the deal.  Why have a penniless middlefrog grabbing most of the profit if both parties know each other and can deal directly with one another?


I'm sorry Clyde.  Some puppets I trust.  But you've just tried to work too many shady deals with me ever since we were sewn.  The answer is still NO.

Please go away Clyde!  You'll live.  Just open wide --- zillions of bugs and rain drops are free goods to frogs.


Scene 3 (February 15, 2001)

Clyde is sitting stark naked on a barstool at one end of the bar in the Cats Meow Club.  This is where he sits every night drinking free Budweiser and staring wistfully at the hat check mouse.  His beer is free, because having a Kermit look-alike who sings and plays guitar at the Cats Meow Club draws in customers.  Occasionally, Clyde sings a nostalgic Sesame Street song.  Most customers actually believe he's the genuine Kermit in flesh so to speak.  

Clyde and the Club's owner, Rats R. Russ, are having a casual conversation at the bar.


When are you going to get a life Clyde?


I'm waiting for another arbitrage opportunity.  Those things don't grow on trees or in frog ponds you know.


Molly is a good mouse, steady, reliable, and pretty.  Can you blame her for not jumping for joy over the attentions of a frog that mostly sits on a barstool and cries in his beer?


I know.  It's depressing.  Life just isn't what it might've been on if I'd lived on Sesame Street.


Speaking of Sesame Street, look who just walked into the Club.  Over there --- it's Kermit's  bosom buddy Miss Piggy.  She's checking her wrap with Molly.  


Clyde:  (sighs)
So it is.  Miss Piggy's been stepping out with my brother lately.  That's my Brother Hat checking his hat, or to be more precise, he's checking the outer hat that covers his indoors hat.


Wow!  Look at her whatcha-ma-call-it . . . her stole --- must be pure mink or Russian sable.  Bet she paid a pretty penny for that wrap around.   How much would you guess?


I don't have to guess.  I know exactly!  It was $10,000 last January --- or should I say one million pennies.  But it  is technically correct to call that particular  fur a "stole."  My brother stole my idea and used Miss Piggy in the scheme.  But I ask you, what kind of pig will trade in pickled pigtails for any amount of money?


According to you, she worked for no pay all those years just like Kermit.  Maybe pickled pigtails investing is her only option.   I guess life just isn't a bed a roses when every move you ever make lies in somebody else's hands.


Tell me about it.

The End
Pictures are courtesy of Deni Johnson at 
You can learn more about Scene 1 in Frog Went A-Courtin' by John Langstaff (Harcourt Brace:   ISBN: 0156339005)

The Lesson to be Learned

Terminology used in this document is defined at  You can find the following definition of arbitrage there and at 

1) Technically, arbitrage consists of purchasing a commodity or security in one market for immediate sale in another market (deterministic arbitrage). (2) Popular usage has expanded the meaning of the term to include any activity which attempts to buy a relatively underpriced item and sell a similar, relatively overpriced item, expecting to profit when the prices resume a more appropriate theoretical or historical relationship (statistical arbitrage). (3) In trading options, convertible securities, and futures, arbitrage techniques can be applied whenever a strategy involves buying and selling packages of related instruments. (4) Risk arbitrage applies the principles of risk offset to mergers and other major corporate developments. The risk offsetting position(s) do not insulate the investor from certain event risks (such as termination of a merger agreement or the risk of delay in the completion of a transaction) so the arbitrage is incomplete. (5) Tax arbitrage transactions are undertaken to share the benefit of differential tax rates or circumstances of two or more parties to a transaction. (6) Regulatory arbitrage transactions are designed to provide indirect access to a market where one party is denied direct access by law or regulation. (7) Swap- driven arbitrage transactions are motivated by the comparative advantages which swap counterparties enjoy in different debt and currency markets. One counterparty may borrow relatively cheaper in the intermediate- or long-term United States dollar market while the other may have a comparative advantage in floating rate sterling. A cross-currency swap can improve both of their positions.

By definition, arbitraging entails investing at zero market (price) risk coupled with the risk of losing relatively minor transactions costs of getting into and closing out contracts.  There might be other risks.  Especially when dealing in forward contracts, there may be credit risks.  Forward contracts are often private agreements between contracting individuals.  Other arbitraging alternatives such as futures and options contracts are generally obtained in trading markets such as the Chicago Board of Trade (CBOT) and the Chicago Board of Options Exchange (CBOE).  In markets like the CBOT or the CBOE, the trading exchanges themselves guarantee payments such that there is no credit risk in hedging or speculating strategies.  Arbitrage entails a hedging strategy that eliminates all market (price) risk while, at the same time, has no chance of losing any money and a positive chance of making a profit.  Sometimes the profit is locked into a fixed amount in advance.  At other times, the profit is unknown, but can never be less than zero (ignoring transactions costs).

Generally, arbitrage opportunities arise when the same item is traded in different markets where information asymmetries between markets allows arbitragers with superior information to exploit investors having inferior information.  In perfectly efficient markets, all information is impounded in prices such that investors who "know more" cannot take advantage of investors who are not up on the latest scoop.  Only in inefficient markets can there be some differences between prices due to unequal impoundings of information in different markets.

In other words, arbitrage opportunities only arise when market inefficiencies allow some prices not to be impacted with all public and private information.  If governments prevent insider exploitation of non-public information  (in the U.S.,  the Securities and Exchange Commission prosecutes insider exploitations), arbitrage opportunities arise mostly due to uneven spreading of public information.  A typical example might arise where there is a lag in information affecting foreign currency prices.  For example, something might take place that impacts the price of Dutch guilders in Singapore before it impacts the price of Dutch guilders in Montreal.  Generally arbitragers circle markets like eagles (or buzzards) and swoop down instantly on any arbitraging opportunity.  Differences in currency prices between Singapore and Montreal might only last for minutes or even seconds before arbitragers equate the prices.  Arbitraging is not a bad thing in society, because arbitraging serves to keep markets efficient and fair.  As long as prices impound all public information, investors are not being exploited simply because they have not heard the latest news.  The important thing is that the news is already impacted in the market price.

One arbitraging strategy requiring no cash or borrowing entails entering simultaneously into a short sale contract and a forward purchase contract.  For example, on January 1 an arbitrager might "go short" by selling an item for $21,200 to be delivered on December 31.  The short sale price is the spot rate on January 1 even though delivery is one year later.  To hedge the transaction on January 1, the arbitrager then takes a forward position to buy the item on December 31 at a January 1 forward price of $10,000.  The forward position might be taken with a forward contract, a futures contract, or a put option, although the put option requires a relatively small amount of up-front cash for the option premium.  A short sale contract might also be negotiated.  The above example of Clyde's arbitraging is unrealistic for several reasons.  First of all, it is unlikely that puppets will enter arbitraging contracts.  Also the price spreads are much smaller since word of large price differentials generally spreads fast between two or more markets.  Also the term is generally much less than one year.  Even though price differentials may be quite small between two markets, arbitragers can make significant profits if they are dealing in notional amounts of millions of dollars.

Another arbitraging strategy requires cash up front.  This is the so-called "cash-and-carry" strategy.  For example, an arbitrager might borrow $10,000 on January 1 in order to purchase an item.  She or he then takes a forward position to sell the item on December 31 at the January 1 "strike price" of  $21,200.  This is the strategy outlined by Clyde in Scene 2 above.  A forward contract generally has a fixed expiration date such as December 31 when settlements are made.  A futures contract has specified expiration date, but settlement may be at any time.  Futures contracting is, thereby, much more complicated than forward contracting.   Futures contacting entails maintaining a margin account with a trading broker.  Margin accounts are marked-to-market continuously and require minimum balances.  The bad news in futures contracting is that a price drop of pigtails on, say, July 14 may entail having to feed more cash into the margin account.  Putting up more cash is not necessary in a forward contract.

Some arbitragers may use more complicated strategies with call and put options.  Others may use more simple strategies.  For example, it is possible to simply buy Dutch guilders in Singapore and sell them in Montreal.  Simple strategies, however, generally require simultaneous buying and selling.  If there are time lags such as 30 days or one year, the arbitrager must enter into more complicated hedging strategies with forward, futures, or option contracts that eliminate market (price) risk.

The above overview provides a casual explanation of arbitraging.  The formalized mathematical analysis requires more explicit assumptions.  The main assumptions are as follows:

In a cash-and-carry strategy, the arbitrager creates a synthetic portfolio of traded assets that duplicates the cash flows and values of the underlying arbitrage items such as pork bellies or Dutch guilders.  By "writing a forward contract" for pigtails, Miss Piggy actually contracted to sell pigtails in one year's time.  This is termed a "short" position.  To hedge (should we say save her tail?), she then went "long" by buying pigtails today with the cash loaned to her at a riskless rate (less than 12%) by Mr. Felt.  For an arbitrage opportunity to exist using a cash-and-carry strategy, there must be a mispricing such that the actual forward price is greater than the theoretical market efficient price.

It is beyond the scope of this document to delve deeper into more complicated arbitraging situations.  One complication that was avoided entails having to pay storage costs on the pigtails.  There are other terms that were not mentioned.  For example, the "repo rate" is defined as the simple interest that equates the forward price with the spot price.  You can read learn much more about arbitraging in derivative instruments textbooks.  One such source is Chapter 2 of Derivative Securities by Robert Jarrow and Stuart Turnbull (South-Western College Publishing, 1999).



Accounting Issues and Controversies

After taking advantage of an arbitrage opportunity, any firm subject to U.S. accounting rules must examine how to account for the outcomes.  In 1998, the Financial Accounting Standards Board (FASB)  issued SFAS 133 on Accounting for Derivative Financial Instruments and Hedging Activities.  This was followed in 1999 with a virtually identical international standard IAS 39 Financial Instruments:  Recognition and Measurement by the International Accounting Standards Committee (IASC).  There are SFAS 133 and IAS 39 disclosure rules as well as accounting measurement rules.

Neither SFAS 133 nor IAS 39 take up arbitrage accounting per se.  As a result, arbitragers must drill down to the accounting rules for component parts of an arbitrage transaction.   For example, in a cash-and-carry arbitrage strategy, it is necessary to first account for the purchased item (e.g., a $10,000 carload of pigtails) and then account for the forward contract to sell that carload of pigtails.  Prior to SFAS 133, forward contracts were only accounted for when settled in cash (called settlement accounting).  Under old rules, there would be no accounting for the $21,200 forward sales contract until the end of the year when the cash settlement takes place.  Under SFAS 133 rules, the forward sales contract qualifies as a derivative financial instrument.  As such, it must be placed on the books and maintained at current market values.  This entails estimating the current market value of the forward contract at the end of every accounting period.  

Under newer SFAS 133 rules, Miss Piggy's forward contract with Candice Bergen could be viewed from the perspective of either a fair value hedge or a cash flow hedge of a forecasted sale of an inventory item.  Example 1 beginning in Paragraph 115 of SFAS 133 illustrates a fair value hedge, and Example 4 beginning in Paragraph 127 illustrates a cash flow hedge of a forecasted sale.   Suppose that the hedge is intended to be a cash flow hedge of the forecasted sale of one carload of pickled pigtails.  Fair value of the forward contract would be estimated at the end of each accounting period.  Assuming the hedge always satisfies effectiveness criteria, periodic increases or decreases in value are posted to an equity account called Other Comprehensive Income (OCI) under SFAS 133.  Unrealized gains and losses under an effective cash flow hedge do not, thereby, affect current earnings until the hedge expires.  For example, if the market value of the forward contract at the end of the first 30 days rises by $4,000, the forward contract would be increased by $4,000 on the balance sheet and the offsetting credit would be to OCI in the equity section of the balance sheet.  If the hedge was viewed as a fair value hedge, the credit would pass through current earnings and into retained earnings.  OCI can only be used for cash flow hedges and foreign currency hedges under SFAS 133.

If the $10,000 purchase of an item is viewed as an inventory holding, the basis of accounting is the lower of cost or market for most firms unless they are classified as securities dealers.  In other words, the inventory balance on the balance sheet does not rise if expected net realization rises above cost, but this balance is written down if the expected net realization falls below cost.  The one exception, where inventory balances are marked-to-market for upside and well as downside price movements, arises when the item in inventory qualifies as a "precious" commodity (such as gold or platinum) having a readily-determinable market value.    Since picked pigtails, along with pork bellies, corn, copper, and crude oil, are not "precious" commodities, Miss Piggy would maintain the investment at historical cost of $10,000 under present accounting rules.  

If an item is viewed as a financial instrument rather than inventory, the accounting becomes more complicated under SFAS 115.  Traders in financial instruments adjust such instruments to fair value with all changes in value passing through current earnings.  Business firms who are not deemed to be traders must designate the instrument as either available-for-sale (AFS) or hold-to-maturity (HTM).  A HTM instrument is maintained at original cost.  An AFS financial instrument must be marked-to-market, but the changes in value pass through OCI rather than current earnings until the instrument is actually sold or otherwise expires.   Under international standards, the IASC requires fair value adjustments for most financial instruments.  This has led to strong reaction from businesses around the world, especially banks.  There are now two major working group debates.  In 1999 the Joint Working Group of the Banking Associations sharply rebuffed the IAS 39 fair value accounting in two white papers that can be downloaded from

In the United States, however, SFAS 115 and SFAS 133 of the FASB do not require fair value mark-to-market accounting in the case of Miss Piggy's $10,000 long position purchase of pigtails.  Unless the "bottom drops out" of the pigtails market, her carload purchase would be maintained at historical cost either as an inventory purchase or as a financial instrument designated as being held-to-maturity.   We would have to know more about her other lines of business to make a choice between the inventory versus financial instruments classification.  One of the reasons that the $10,000 investment cannot be a derivative financial instrument is the SFAS 133 requirement that the initial investment must be zero or relatively minor to be subject to SFAS 133 requirements under SFAS 133.  instrument.  See SFAS 133 Paragraphs 6b and Appendix A Paragraph 57b.  Also see IAS 39 IAS 39: Paragraph 10b.

Her short position $21,200 strike price forward sales contract, on the other hand, requires no initial investment and is a derivative financial instrument that must continually be marked-to-market under SFAS 133 and IAS 39 rules.  However, the changes in the forward contract's value do not affect current earnings as long as the forward contract meets the all tests of being an effective cash flow hedge of a forecasted sale of a carload of pickled pigtails.  Under SFAS 133 rules, changes in value accumulate in a special equity account called Other Comprehensive Income (OCI) if the forward contract is designated in advance as a cash flow hedge of a forecasted sale of one carload of pigtails.  For example, suppose that at the end of the first month, the value of the forward contract jumps from $0 to $4,000.  The forward contract would be valued at $4,000 and the offsetting credit would be posted to OCI rather than current earnings.  The value of the forward contract converges on zero at the end of one year.  All cumulative gains and losses in OCI offset one another such that after one year. the forward contract will have no effect upon current earnings.  A forward hedge simply locks in the sales (strike) price agreed to at the start of the year.  When the sale transpires,  Miss Piggy has a hedged outcome of $10,000 = $21,200-$11,200 settlement profit (net of interest expense and loan repayment principal) on all arbitrage transactions.  The $10,000 profit is posted to current earnings after the loan (with interest) is paid off to Mr. Felt (assuming Hat A. Felt loaned the $10,000 to Miss Piggy).

Both the FASB and the IASC are moving closer to requiring fair value accounting for all financial instruments.  Rules have not yet been established for adjusting all financial instruments to fair values at the end of each accounting period, but most of us expect the FASB and the IASC to require changes in fair value to be posted to current earnings rather than OCI.  It is not clear how the new rules will affect derivative financial hedges (that are only a subset of all financial instruments), but in all probability the complex accounting rules under SFAS 133 and IAS 39 will be eliminated in favor of treating derivative financial instruments like all other financial instruments and post all changes in fair values to current earnings.  

At the moment, accounting standards dictate fair value accounting for derivative financial instruments but not all financial instruments.  However, the entire state of fair value accounting is in a state of change at the moment with respect to both U.S. and international accounting standards.  Readers interested in downloading the Joint Working Group of Banking Associations' white Financial Instruments:  Issues Relating to Banks should follow the downloading instructions at  (Trinity University students may find this on J:\courses\acct5341\iasc\jwgfinal.pdf ).  The above illustration, where the $10,000 purchase is maintained on the balance sheet at historical cost and the forward sales contract is adjusted periodically to fair value, is an inconsistency known in banking  accounting as a "mismatch accounting."  In the above document, you will find the following in Paragraph 2.28 beginning on Page 19 (with emphasis added):

Bases for distinguishing which financial instruments are to be carried at cost and which at fair value have rested in some part on management intent to hold or trade, on the nature of the financial instrument (for example, loans are generally carried at cost and derivatives at fair value, although there have been many exceptions), and on the nature of the business activities (banking book vs. trading activities). Because these bases for distinction are not grounded in the essential properties of financial instruments, they are not capable of reliable and consistent application. This has been clearly demonstrated by existing accounting practices over the years, and by standards (including IAS 39 and SFAS 133) that have found it necessary to develop detailed, complex, and necessarily highly arbitrary, rules to try to operationalise these distinctions. (The rules, and exceptions thereto, for classifying debt instruments as "held-to-maturity" investments demonstrate this.) The basic practical shortcomings of mixed measurement models, which result in inhibiting comparability and understandability, include the following as applied to banks: · 

On December 14, 1999 the FASB issued Exposure Draft 204-B entitled Reporting Financial Instruments and Certain Related Assets and Liabilities at Fair Value.  This document can be downloaded from (Trinity University students can find the document at J:\courses\acct5341\fasb\pvfvalu1.doc ).  Paragraph 12 of this document reads as follows:

The following is a highly summarized version of the Board’s preliminary views.  It provides an overview only and should be read in conjunction with the remainder of the document.  The key decisions in the project are:

a.      The ultimate objective of this project is to resolve conceptual and measurement issues related to reporting at fair value all financial instruments that are assets or liabilities.

b.      Financial instruments are (a) cash, (b) ownership interests in an entity, (c) contractual rights and obligations for deliveries of financial instruments, or (d) contractual rights and obligations for exchanges of financial instruments.

c.      The requirement for fair value measurement would apply to all financial instruments except equity investments accounted for by consolidation or the equity method, minority interests in consolidated subsidiaries, a reporting entity’s own equity instruments, and obligations for postretirement and postemployment benefits (including pensions).  The application to leases would be limited to remeasurement at fair value of accounts receivable and accounts payable recognized under current standards for lease accounting.

d.      The requirements would apply to financial asset servicing rights (even though those rights are not financial instruments) and to contracts that are similar to financial instruments but do not meet the definition because of an option to settle by delivering something other than a financial instrument.

e.      Fair value is an estimated market exit price, that is, an estimate of the amount that would have been realized if the entity had sold the asset or paid if it had settled the liability on the reporting date.  In some cases, the price estimate will be based on the price of the item as a part of a group of similar items, that is, it may be a portfolio price.

f.       The estimated market exit price should be based on prices in observed transactions to the extent possible.  If estimates are available from two or more sources, the entity should use the one based most closely on prices in the market in which the entity can realize the most advantageous price.

g.      Estimates based on actual transactions are preferable because those prices arise from negotiations between two entities.  In certain specifically described situations, transaction prices require adjustment.

h.      Estimates based on transaction prices of an identical instrument generally are likely to be more realistic than estimates based on transaction prices of a similar instrument.  However, if the similar instrument has been traded more recently, its price should be considered for indications that the price of the identical instrument would have changed if there had been a more recent transaction.

i.       If transaction prices of identical or reasonably comparable items are not available, it will be necessary to estimate a price using a valuation model.  Different models have different levels of precision, but, in general, models that are used to set transaction prices for items of the same or reasonably similar class should yield more realistic estimates than internally developed models.

j.       If the best estimate of an exit price is based on present value of expected cash flows, the principles in the FASB Exposure Draft, Using Cash Flow Information and Present Value in Accounting Measurements (the present value Exposure Draft), should be applied.

k.         The estimated market exit price of a liability should reflect the creditworthiness of the debtor.

With special focus on intangible assets accounting --- I plan on assigning this in my accounting theory course:
What's wrong with the 500-year-old way in which all companies keep their books? Just about everything, says Baruch Lev, who has proposed a new method for determining the value of the intangible assets that are at the heart of the new economy.   

Accounting, says Baruch Lev, the Philip Bardes Professor of Accounting and Finance at New York University's Leonard N. Stern School of Business, is increasingly irrelevant. And, for that reason, it is increasingly essential and interesting to all of us. The problem, says Lev, is that the systems of accounting and financial reporting that are being used today date back more than 500 years. These systems are not only part of the old economy, they're part of the old, old economy. Luca Pacioli, an Italian mathematician who lived in Venice in the 1400s, developed double-entry bookkeeping in order to offer businesspeople a simple method for keeping track of their transactions -- and, even more important, for making sense of the way that they did business. "If you cannot be a good accountant," Pacioli wrote, "you will grope your way forward like a blind man and may meet great losses."

Today, argues Lev, being a good accountant doesn't guarantee good eyesight. The old lens cannot capture the new economy, in which value is created by intangible assets: ideas, brands, ways of working, and franchises.

The disconnect, says Lev, affects more than just financial analysts and corporate financial officers: Employees don't know how to value their contributions accurately. Managers don't have good numbers to refer to when deciding whether to back a project, or when assessing a project's performance. Are knowledge-based companies overvalued on the stock market? Are companies paying too much to acquire knowledge-based assets? These questions, says Lev, and more, cannot be adequately answered with today's accounting and financial-reporting methods. Accounting, in other words, no longer delivers accountability.

Lev, who is also director of the Vincent C. Ross Institute of Accounting Research and the Project for Research on Intangibles, has become the most articulate, thoughtful, and outspoken critic of old-fashioned accounting, and the most creative advocate of a new, knowledge-based approach to accounting. He has pioneered the development of a Knowledge Capital Scoreboard, which attempts to put hard numbers to intangible assets.

Readers interested in current SFAS 133 and IAS 39 accounting rules should visit the following two web sites where links to many other sources are given along with transcribed and audio opinions of derivative financial instruments experts are provided: (with audio)



A Tribute to Bill Breit and Ken Elzinga

Probably the most successful attempts in the world to teach economics via fiction can be found in three mystery novels authored to date by "Marshall Jevons."  Marshall Jevons is really a pseudonym derived from the combined names of two famous 19th Century economists ---  Alfred Marshall and William Stanley Jevons.  The real 20th century economist authors are William Breit and Kenneth G. Elzinga.  Dr. Elzinga holds a distinguished endowed chair at the University of Virginia, and Dr. Breit has a distinguished endowed chair at Trinity University in San Antonio.

The three mystery novels to date penned under the name of Marshall Jevons are as follows:

While vacationing at the Caneel Bay Plantation in the Virgin Islands, Professors Breit and Elzinga dreamed up the idea of teaching economics in mystery novels.  Thus commenced their first mystery book using the Virgin Islands as a setting for a murder most foul.  The hero, Henry Spearman, in the plot is an economics professor fashioned after the famous 20th Century economist named Milton Friedman.  

The style of all the above novels is traditional British mystery writing.  The novels are almost borrowed in style from Agatha Christie's many books with romantic settings, quaint characters, mysterious murderers, befuddled police, and compact plots.  But unlike the Christie novels, the Marshall Jevons books are salted with short lessons in economics and intricate economic reasoning woven into the Dr. Spearman's deductions.

Success in writing can be judged in a number of ways.  One way is from the royalties.  The three Jevons novels have been very lucrative.  For example, the Japanese grabbed up over 50,000 copies of the first novel.  That novel has been repeatedly reprinted in both hard copy and paperback.  All three novels have found huge markets in college economics courses and high school honors programs where the mystery novels are featured as part of the economics curriculu.

Another measure of success lies in the reviews of professional critics who write for famous newspapers and academic journals.  The three Marshall Jevons have consistently received rave reviews.  The listing of over 50 major review articles to date includes the following sampling:

I think the major test of success is the repeated use of these books by economics instructors as part of curriculum content.  Both in high schools and in the first course in economics, there are perceived learning benefits of embedding lessons in fiction if writing is well done.  Reviewers and instructors seem to repeatedly praise these works of Bill Breit and Ken Elzinga.

But the authors themselves caution that you can have too much of a good thing.  Novels, poems, movies, plays, and other forms of popular literature and media are probably not panaceas for all types of learning.  Claudia Dulmage states the following in "The Economist as Novelist:  Professor Kenneth Elzinga Unlocks the Mysteries of Economic Analysis," Antitrust, Winter, 1988, pg. 29:

Despite the use of the book (mystery novel) as a teaching tool, Elzinga thinks there are better places for an antitrust lawyer to turn for an introduction to economic principles, particularly those related to antitrust.  "Herfindahls and cross-elasticity of supply have not yet made their way into a Jevons mystery," he explains.  And "it probably is a bit of a reach" to draw parallels between Spearman's crime-solving methodology and The Fatal Equilibrium --- in which all human behavior is reduced to primarily the pursuit of calculated self-interest--- and Chicago School theories of the only legitimate goals to be served by antitrust.  Elzinga doesn't think Jevons' work informs us a great deal about the debate concerning the proper goals of antitrust.

It might be noted that the authors also admit that most readers are sticklers for detail.  Professors Breit and Elzinga are constantly amazed at the comments they receive from readers.  I am certain they would like to hear from you after you have studied economics from one or all of their three mystery books to date.

In any case, Bill Breit and Ken Elzinga are pathfinders in the quest merging of entertainment and education in economics.

Other works by Bill Breit and Ken Elzinga include the following books:

Update in Fall 2003
The World of a Favored Colleague, Scholar, and Mystery Writer

The World of Bill Breit 

I might note that Ken Elzinga has been a visiting professor at Trinity University on more than one occasion and is Bill Breit's co-author in the series of murder mystery novels written under the pseudonym Thomas Jevons.  At one time I wrote a tribute to Breit and Elzinga at

Ken is has one of the most prestigious endowed chairs at the University of Virginia and lives in one of the university's most prestigious houses on campus. 

On September 30, Ken published a very, very controversial article in Inside Higher Ed.

"Christian Academe vs. Christians in Academe," by Kenneth G. Elzinga, Inside Higher Ed, September 30, 2005 ---

When I arrived at UVa in 1967, Christian student groups were not permitted to meet on the grounds of the University. So far as I know, Virginia was the only public university to have this restraint. How God used two UVa students to break down this barrier is a story well worth telling, but not here.

As an assistant professor, I once tried to schedule a room in the student union for a faculty Bible study and was told no. I asked if I could schedule a room to discuss the writings of Karl Marx. No problem. But the gospel of Mark: that was apparently off limits to discuss on grounds.

On several occasions, when parents ask me to talk to their high school age children about attending the University of Virginia, if in the course of the conversation I learn that the children are followers of Jesus, I ask them if they are considering a Christian school as well. And if not, I ask why. And we have a conversation about Christian versus secular schools.

I am, in other words, a friend of Christian higher education even though I have been called, as a matter of vocation, to be at a secular school.

That is the background I bring to the question I address here: What is the difference between Christians in higher education and Christian higher education?

I can talk more knowledgeably about Christians in higher education since I am one. Christians in higher education, at secular schools, can be placed in two different bins or categories. I’m not happy with the terms, but I’ll call one group the “privatizers” and the other, the “evangelicals.”

Privatizers in higher education view their faith as disconnected from their work as professors. They are involved in a local church (often heavily involved); if they are married, they are probably faithful to their spouse; if they have children, they love their kids; and their names do not show up in the newspapers having done something that embarrasses their school.

But these professors, the privatizers, are not identified at their schools as Christians; this aspect of their identity may never be known by students or colleagues. Not that their faith is a deep or dark secret; they probably consider the information irrelevant. They are identified as professors of chemistry or accounting or German literature. That’s it. Their Christian faith is private and apart from their jobs.

These professors live in two worlds, not simultaneously, but sequentially: one is secular; that’s the campus; the other is sacred; that’s their church.

Now let me say, as an aside, that by my observation some Christian faculty at Christian colleges and universities live like privatizers as well. I have yet to decide whether this is sad, or scandalous, but they are not the subject of this discussion.

The second kind of Christian professor in higher education I’ll call the evangelical. The professors, researchers, and scholars in higher education I have labeled the evangelicals believe that the quest for truth begins and ends with Jesus. Their work involves teaching and research in their disciplines. But their calling entails extending the reign of Jesus into all realms.

The evangelicals resonate with the words of the Dutch Reformer Abraham Kuyper: “There is not one square inch of the entire creation about which Jesus Christ does not cry out, ‘This is mine! This belongs to me.’”

These professors can be found giving talks to the campus chapter of Inter-Varsity Christian Fellowship, or Campus Crusade for Christ; or the Fellowship of Christian Athletes, or a dozen other parachurch organizations on their campuses.

These professors can be found leading a Bible study in their office with students or other faculty. These professors can be found having office hour conversations about the Christian faith, as well as office hour conversations about sociology and microbiology.

These professors can even be found praying for the spread of the gospel on their campuses. These are professors who, in accord with I Peter 3:15, are “always ready to give a defense of the hope that is within them,” but should be doing so, as Peter makes clear, “with gentleness and reverence.”

But you will not find these professors praying before class; you will not find these professors explaining the gospel in the classroom; you will not find these professors teaching their courses from a “Christian perspective.” While they are Christians in higher education, their institutional environment is not one of Christian higher education. Their lectures will not begin with a prayer nor will they end with an altar call.

Indeed, Christian scholars in higher education at secular schools must be scrupulously fair and impartial with their students who are not followers of Jesus, treating the academic endeavors of these students the same way they would those students who share their Christian convictions.

Now here’s what tricky to describe. It is not so much that, as Christians, these professors, the evangelicals, operate under the radar screen. In my own case, for example: probably most of my students know that I am a follower of Jesus. There are signs up on campus announcing talks that I give to student Christian groups.

Evangelical professors may be quite visible as Christians at their secular colleges and universities. But they operate under the constraint that, fundamentally, they have been hired by their institutions to teach and do research in a particular discipline or subject matter, not to evangelize.

To the extent they are open about their Christian faith, the evangelicals do so the same way that professors who are enthused about sailing or cooking can share with students something about their life outside the classroom.

A professor who is passionate about sailing can make that known to her students; her students may find that interesting; her students may even become interested in sailing. But all of her students understand that an interest or disinterest in sailing has nothing to do with the treatment the student receives in being taught chemistry or accounting. My students understand that their grade is in no way affected by their own religious beliefs, or lack thereof.

So these are two versions of Christians in higher education. In my reductionistic, bimodal distribution, one Christian professor sees his faith as largely irrelevant to his job. For the other, her job is fully under the Lordship of Jesus as a calling.

Continued in article

Accounting Mystery Novels

A new mystery novel that also teaches internal auditing.  The Big R:  The CIA Expos by Larry Crumbley, Douglas Ziegenfuss, John O'Shaughnessy, and Kristine Palmer.  There is a cover article about this book in the IIA Educator, Spring 2000, p. 1.  The Spring 2000 newsletter will eventually be posted at 

This is one of the latest in a series of mystery novels designed to teach accounting.  Larry Crumbley is often the sole author or a co-author.  Other titles include the following:

Code Blue by R.E. McDermott, K.D. Stocks, and J. Ogden (Syracuse, UT:  Traemus Books, ISBN 0-9675072-0-0, 2000) --- 

What you are about to read represents a new way of teaching technical material. As the approach is unorthodox, an explanation is warranted. The format chosen is that of a textbook-novel. It tells the story of a CPA who accepts a consulting job for a community hospital, a job that involves him in romance, mystery, murder, intrigue, and...managed care!

My primary purpose in selecting this format is learning in context. Many learners complain that traditional education fails to prepare them for the real world. In this textbook-novel, I discuss not only how to find the right answers but also how to identify the right questions. My experience has been that the second issue is often far more important than the first.

In a similar vein, the book stresses the principle that how a manager does something is often as important as what he or she does. Some managers fail even though they do the right thing--because they do it in the wrong way. It is not enough to be sincere; one must be right. It is not enough to be right; one must be effective!

Creativity is another topic that can best be covered in the format of a textbook-novel. How does one apply old principles to a new environment? What process does one follow in breaking a complex consulting project into manageable tasks?

This book was written for anyone impacted by the cost of healthcare or interest in one "solution" that has been offered--a set of principles known as managed care. This audience certainly includes physicians, nurses, healthcare administrators, accountants, personnel directors and other executives of businesses that pay the cost through health insurance premiums.

In a recent Fortune Magazine poll, nearly two out of three CEOs called skyrocketing medical costs one of the most important problems facing American corporations. One-third of those surveyed stated that healthcare costs are the single biggest problem they would face this decade. The United States currently spends more than $1 trillion for the healthcare of its citizens. Projections indicate this figure will double within the next decade.

This book also contains technical material for the accounting student who is interested in learning more about healthcare cost accounting. It has been three decades since the number of service-industry jobs in the United States bypassed those in manufacturing. Still, accounting textbooks continue to emphasize traditional manufacturing cost accounting while neglecting or even ignoring the service industry.

Technical supplements, found in the appendix, illustrate the concepts taught, explain service industry accounting and contrast it with manufacturing accounting. This material is not essential to the story line and can be skipped by the more general reader. Questions for each chapter can be found on the author's web page:

As a boy, I lived on the shores of Lake Washington in the small community of Hunt's Point. Many of the homes have docks, and one of our neighbors bought an airplane boat--not a plane with floating pods, as one often sees in that part of the country, but a plane with a hull--like a boat!

The advantages of such a craft in the Pacific Northwest are not hard to imagine, but the vehicle had some drawbacks. Although it did things neither a boat nor airplane could do alone, it didn't always fly as well as a plane nor sail as well as a boat. This analogy had come to me as I've studied the art of fiction. I am a hospital administrator turned consultant as well as a professor of accounting and healthcare administration. In my formal training, I was taught expository writing. Fiction is obviously a different animal.

In a professional article, the author begins with an introductory statement: a thesis that is followed by an explanation and a summary. Organization is tight--redundancy is discouraged. In fiction, the author must have a story line that involves opposition. Characters must be interesting; and the plot must keep moving. Merging the objectives of these two writing styles presents challenges, especially when the purpose is to explain the technical principles of managed care, accounting, and finance.

A textbook-novel is not as easy to write as a textbook and may not be as action focused as a novel. On the other hand, a textbook-novel is hopefully more informative than many novels and is certainly more interesting, perhaps even more educational from the standpoint of context, than a textbook.

As the creator of Code Blue, my goal is to make learning easy by making it fun. It is up to you to determine how successful we were in achieving this objective.

Richard E. McDermott 
January 1, 2000

Edutainment via Fiction Writing

'May 7, 2011 message from Larry Crumbley,

Bob, you may wish to update your accounting novel material. My tax Ultimate Ripoff novel is now in the fourth edition and I am now revising it. My cost accounting novel Costly Reflections in A Midas Mirror, is in the 3th edition at Carolina Academic Press. They also have published later editions of my auditing and forensic accounting novels. LSU press will have my Sports Marketing out shortly. Give me your mailing address and I will send you a couple. Larry

May 8, 2011 reply from Bob Jensen

Hi Larry,

My forays into fiction  so bad that even I won't share them --- and I share almost everything I write. My one exception is my "play"  on eduarbitraging at 
Now you know why I won't share my other fiction attempts.

I'm glad you're still doing well with your mystery/detective novels.

My threads on edutainment via accounting fiction writing are at 
The module on the books by Larry Crumbley needs updating. I will add your listing of teaching innovation references at 


Also see


I also need to update my page on Accounting Novels in general at
If you have any suggestions for things I should add here beyond what are noted above, please let me know.

Bob Jensen


The Genesis Modification by Peter Kruger

Hi Peter,

I added your message to the following documents:

1. New Bookmarks Edition for June 14 (forthcoming) ---

2.  (Where I also pay tribute to pioneers in education through mystery novels.)


Bob (Robert E.) Jensen Jesse H. Jones Distinguished Professor of Business Trinity University, San Antonio, TX 78212 Voice: (210) 999-7347 Fax: (210) 999-8134 Email:

-----Original Message-----
From: Peter Kruger [
Sent: Friday, June 09, 2000 6:25 AM
Subject: The Genesis Modification


I thought that the readers of your ebook newsletter might be interested in this.

Please find below the announcement of our on-line novel 'The Genesis Modification.'

The title, which in view of the recent controversy regarding the accidental release of GM oil seed rape is highly topical, can be found at

Peter Kruger


The Novel, 'The Genesis Modification', is Available for eBooks and Pocket PCs.

9th June 2000. Cambridge UK. Steinkrug Publications have released an on-line version of the novel 'The Genesis Modification' compatible with a range of eBook portable readers. The release of the title has been timed to coincide with the launch of a number of new Windows CE driven pocket PCs capable of supporting on-line publications. ____

Man continues to play Russian Roulette with the environment. BSE and the accidental release of Genetically Modified crops are the result of reckless gambles we have made with our future. Every time we get lucky, our belief that we will always be lucky grows. But this is a game where we will only get the chance to be unlucky once

The Genesis Modification is set forty years into future. The Green Alliance Party dominates European politics and dictates economic policies in the US. The party is clear who was to blame for the accidental release of the Genetically Modified crops which triggered a string of environmental disasters. But these assumptions are challenged when a body is discovered in a run down hotel in London. _____

The Genesis Modification is supplied as a Microsoft Reader file for Windows CE driven Pocket PCs or as Word file. The Pocket PC is proving to be a simple and convenient way of accessing eBooks. The title is also available for the Nuvomedia Rocket eBook - which the May edition of Red Herring suggested 'might be the next portable device you can't live without.'

Steinkrug believe that the Web, as a delivery medium, will influence both the style and content of fictional works. Emerging technology such as 3G will improve this delivery mechanism and, in time, the eBook could replace the hardback book.

The first section of Genesis Modification is available free and the complete book costs US$7.99 It can be found at


About Steinkrug

Formed in 1995 Steinkrug Publications have developed a range of Web based interactive content. The company sees the growth of the World Wide Web as an opportunity to replace the hardback element of the book publishing cycle. It also feels the global nature of the Web and the availability of reading devices will bring about a revolution in the book publishing industry similar to the one caused by MP3 in the music industry.

For further details contact:-

Peter Kruger. Steinkrug Publications Ltd. 20 Leaden Hill, Orwell, Royston, Herts. SG8 5QH
Tel:- ++ 44 (0) 1223 208926 Email

Christie Malry's Own Double-Entry
August 22, 2005 message from Dennis Beresford [dberesfo@TERRY.UGA.EDU]

I recently purchased Christie Malry's Own Double-Entry [Paperback] By: B.S. Johnson through Amazon. While I haven't had a chance to start reading it yet, the following is the book's description in Amazon:

BS Johnson is one of those experimental writers, controversial during their lives that subsequently vanishes from print. Johnson was a journalist, a socialist, and a fine novelist. Best known for The Unfortunates (his book in a box where every chapter is separately bound and the reader is invited to read them in any order he or she wishes), Christie Malry's Own Double Entry is perhaps his most accessible novel. However, this "accessibility" is in the midst of a studiedly experimental text. This is a corruscating satire in which Johnson targets one of the symbols of capitalism, the double entry system. The very basis of accountancy, and the manipulation of finance, Johnson turns this building block on its head as his central character, Christie Malry, a young man with a future, decides that he will live his life according to the principles of double entry.

Johnson's novel has acute observations on a variety of issues in British life that still merit comment. How working class people come to vote conservative, the manner in which people's worth is measured financially; and all of this is in the midst of an angry satire where Malry wreaks vengeance on the system. It is a bitter cycnical novel, with a dark wit.

There is love, sex, and death; and an unusual use for shaving foam. And all of this is presented in a slightly distant way, where Johnson continually turns to the reader and winks, letting you know this is a novel. Characters are aware of their place in fiction, and Johnson deconstructs the novel to let you see how it works. (end of review)

By the way, while it is not on point with your request, I just finished reading "The World is Flat" and found it to be one of the most interesting and provocative books I've read in a long time.

Denny Beresford

August 22, 2005 reply from JOHN STANCIL [jstancil@VERIZON.NET]

“The Principles” by Barry Cameron and Tom Pryor ( ) is a novel incorporating the principles of Activity Based Costing.

John Stancil


Bob Jensen's home page is at