The accounting conservatism principle - Free Essay Example

Sample details Pages: 8 Words: 2529 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? In this paper we analyze the relationship between the accounting conservatism principle and the effects of this principle in the Dutch banking sector during the economic crisis. We will focus on several financial institutions and other companies that subsequently performed well or disastrous. The main theme of our research paper is a investigation of economic consequences in the accounting science. Don’t waste time! Our writers will create an original "The accounting conservatism principle" essay for you Create order We will discuss an accounting principle and then investigate the effects that this principle has on certain economic events. The sub theme of our paper is a further investigation of the well-known and the important accounting conservatism principle. We will use the conservatism principle to make a new analysis by researching this principle and its effects on the functioning of several Dutch financial institutions during this state of negative economic dynamics. 1.2 Relevance The main focus of this paper is to further investigate a relevant and well acknowledged sub topic in the accounting science, considering the multitude of previous scientific papers and our own interests we have chosen for the accounting conservatism principle. A brief definition of this accounting principle is: A accounting guideline that understates assets and revenues and overstates liabilities and expenses. (Dictionary of Accounting Terms, 4th edition, Joel G. Spiegel, Jae K. Shim) This means that expenses should be recognized directly while revenues should be recognized when its verifiable that will be realized. The conservatism principle holds that in reporting the financial statements a more pessimistic picture (understate) than a optimistic picture (overstate) will be described, due to this principle there is less chance of users of financial information being hurt by relying on prepared financial statements. The accounting conservatism principle in of the most important pri nciples in the accounting profession and science, Basu (1997,8) states that conservatism has influenced the accounting practice for more than 500 years. Watts (2003) wrote in his paper conservatism in accounting, that there is a great scientific benefit in further researching the accounting conservatism principle. In our opinion it would be a great opportunity to further explore the effects of this important and long lasting principle in combination with the recent financial crisis. The recent financial crisis emerged in 2007 and at the moment of writing the effects and economic consequences is still visible and active in todays business world. We will briefly introduce this recent financial crisis in order to provide the necessary heuristics to the neutral reader. Due to various aspects this crisis has emerged and evolved and left its footmarks on the entire business world. We will discuss the important aspects that created the crisis and have made the crisis more sustainable th at are given by several economic experts. First of all the financial crisis came into existence in the United States in the end of 2007. The most important cause of the financial crisis are the reckless and unsustainable lending practices of several top banks in the US  [1]  . Various US top banks sold financial products with high risk to their customers, especially real estate mortgages. These mortgages where covered by securities, which had risks that were hard to estimate. A reaction to a more broad credit boom, increase in oil and food prices was a speculative bubble in real estate and equities, which served to reinforce the risky lending practices.  [2]  The emergence of high risk loan losses was the beginning of a financial crisis in 2007. In consequence of the loan losses and the fall of Lehman Brothers in September 2008 a financial panic brakes out. As result of massive declines in stock rates and real estate prices several large investment institutions and banks in both Europe and the United States came in serious financial trouble and some of them went bankrupt. This worldwide crisis has caused several economic consequences like; rapidly increasing unemployment rates, a decline of commodity prices, a fall of international trade and of the most important consequences of all is a lack of trust of public in financial institutions, banks and the public began to set question marks on management policies, strategies and ethical behaviour. The general consensus of economists is that this crisis is going to be the worst since the Great Depression of 1930 and that complete recovery of the market will be accomplished somewhere near 2010/2011  [3]  4. This global phenomenon is the basis for a lot of scientist and practitioners to investigate the causes, results, possible prevention methods and the way to structure these financial institutions in a way that such economic crisis could be prevented in the future. In our research we will focus on the ca uses of the economic crisis, we will mention some of them while others that are more significant for our research will be presented more elaborately. Some practitioners and researchers claim that these are the main causes of the financial crisis: increase of oil prices, weakened regulation activities by the government, improper and inadequate functioning of CEO of the Federal Reserve Bank Alan Greenspan and over-leveraging (credit default swaps and collaterized debt obligations). To introduce our research question, we will further investigate one of the causes namely over-leveraging because this specific cause is of importance for our research. A lot of banks and investors miscalculated the level of inherent risk in the unregulated Collateralized debt obligation and Credit Default Swap markets. In this way banks and investors were able to take advantage of low interest rates and borrow huge sums of money that they only could pay back if the housing market continued to increase in va lue.  [5]  Banks were highly dependent on future earnings such as the profits they assumed to make of the mortgages, what they didnt take into consideration is the fact that much of these mortgages carried a lot of risks and that the earnings were not verifiable and realized. So they overstated their future earnings and they massively pursued an optimistic view which led to an overstatement of their earnings. So having said this we know can see that the accounting conservatism principle was not applied by these banks. Having enriched ourselves with this information we were very interested in investigating why accounting conservatism which dominates as a solid theory for many years and is incorporated in the accounting regulations and in many scientific literature has not been applied in the banking sector. Our research question thus states; What is the reason that the accounting conservatism principle didnt succeed in the Dutch banking sector? This research paper will b e especially of importance and value for practionners, financial analysts, accounting students and other generally interested readers. Practioners and scientists like Basu, Watts, Dietrich, Riedl, Mcleay and Raonic did an investigation in the relationship between accounting conservatism and for instance stock returns, but they do not investigate the relationship between accounting conservatism and the effects on the financial sector during a recession. Our research is unique because it is the first research of the accounting principle and the effects and relation on the Dutch banking sector during the recent (2007-2010/11) financial crisis. To measure the effects of accounting conservatism in relation with the performance of the Dutch banks during the recession. Literature review In this part of the paper we are going to study and present several scientific papers of well-acknowledged practitioners. We will define the accounting conservatism principle and we will view this principle from the point of view of different scholars and further more we will discuss the importance of the accounting conservatism principle and its effects on different business ratios. Accounting Conservatism Conservatism is defined as the differential verifiability required to recognize profits versus losses. (Watts,2003) Watts stated that conservatism is the asymmetrical verification requirement for gains and losses. It means there is a difference in verification requirements for recognizing gains and losses. The asymmetrical verification interpretation is incorporated in the definition of Watts as differential verifiability. Conservatism also has an extreme form this form is also referred to as the traditional conservatism adage: anticipate no profit, but anticipate all losses (Bliss, 1924) This means that a company should not recognize profits before there is a legal claim to the revenues generating them and that the revenues are verifiable. All losses should be recognized by the company even when they arent completely verifiable. Basu interpreted the conservatism adage as: the accountants tendency to require a higher degree of verification to recognize good news as gains than to recognize bad news as losses. He deducted this interpretation from several accounting concepts, procedures and principles. For instance, the Statement of Financial Accounting Concepts ( SFAC) No.2 (FASB, 1980) paragraph 95 states: if two estimates of amounts to be received or paid in the future are about equally likely, conservatism dictates using the less optimistic estimate. He also mentioned some conservatism examples in the Accounting Research Board(ARB). ARB 45 states: a company should immediately recognize changes in cost estimates if they result in future expected losses on long-term contracts, but not if they result in increased future profits. Thus conservatism results in a greater probability of timely accounting recognition of bad news than for good news. (Basu, 1997) An alternative definition of accounting conservatism is of Belkaoui (1985). He claims that conservatism implies that preferably the lowest values of assets and revenues and the highest values of liabilit ies and expenses should be reported More broadly this means that accountants prefer accounting methods that lead to lower reported values for shareholders. To explain the roots of the accounting conservatism principle we will discuss the historical developments, theories and explanations of conservatism. The influence of conservatism on the accounting practice has been for centuries. Basu argued that this principle significantly influenced the accounting practice for at least 500 years.(Basu,1997) Historical records from trading deals in the 15th century show that accounting in medieval Europe waws In our opinion the traditional accounting conservatism adage is not suitable for our research, in todays economic environment it would to extreme to think that one managing a company could apply this traditional principle. The first definition of Watts is the most suitable for our research because it is the broadest, simple and it captures in a glance the fundamentals of the acco unting conservatism principle. Literature table: Paper Title Author Object of study Sample(size, country, period) Methodology Conclusion 1 Conservatism in Accounting Part I: Explanations and Implications Ross L. Watts Examination of alternative explanations for conservatism in accounting and their implications for accounting regulators. This paper is based on existing literature(literature study), thus there is no test information included, September 2003 This paper studies conservatism in accounting and is divided in two parts. The first Part discusses explanations for conservatism and draws implications for regulation and standard setting. The paper draws a general contracting explanation for conservatism and predicts that other contracts employed within the firm, will also generate conservatism. It offers also a new argument: that an information perspective produces conservatism once the information costs of changed managerial behavior are introduced even without contracting considerations. The main conclusion of this paper is that conservatism is essential. Managers will bias and noise value estimates, because there is a lack of verifiability, managers have limited tenures and limited liabilitys. If regulators want to improve financial reporting, they must recognize the importance of verification, problems that conservatisms asymmetric requirement evolved to address and regulators should concentrate on the accountings core competence. 2 Conservatism in Accounting Part II: Evidence and Research Opportunities Ross L. Watts Summary of the empirical evidence on conservatism, its consistency with alternative explanations, and opportunities for future research. This paper is based on existing literature(literature study), thus there is no test information included, September 2003 This is Part II of the literature study of conservatism in accounting. This part summarizes the empirical evidence on the existence of conservatism. Ross L. Watts elaborates se veral measurements for conservatism, draws evidences on alternative conservatism explanations and on non-conservatism explanations. Further this article discusses some research opportunities. In this paper the writer concludes that existing evidence for accounting conservatism is most consistent with the contracting and litigation explanations. Further the writer concludes there is a reason to believe that the four explanations for conservatism (contracting, litigation, tax and regulation) are not independent. Also conservatism is driven by a concern with overpayment by contracting parties, courts and government and this principle will not exclude earnings management or abandonment options. 3 The conservatism principle and the asymmetric timeliness of earnings Sudipta Basu Re-examination of the conservatism principle. Investigation of the effects of the conservatism principle on reported financial statements. The samples implemented for the test in this paper consi st of all firm-year observations from 1963 -1990 with returns data on the center for research in security prices NYSE/AMEX monthly files, and with necessary accounting data on the compustat annual industrial and research files. (United States). The paper extends research on the timeliness of earnings by pointing out that the timelines is asymmetrically greater for bad news than for goods news. S. Basu states that in efficient markets, stock returns symmetrically and quickly reflect all publicly available news, so he uses returns to measure news. The research of the conservatism principle is based on four predictions. For the first prediction: earnings is more timely or concurrently sensitive in reflecting publicly available bad news than good news the researcher used negative and positive unexpected annual stock returns to proxy for bad news and good news. For the other three predictions S.Basu used empirical tests. S. Basu investigated the effects of the conservatism principl e on reported financial statements and interprets conservatism as resulting in earnings reflecting bad news more quickly than good news. He indicated that the concurrent sensitivity of earnings to negative returns is two to six times as large as the concurrent sensitivity of earnings to positive returns and he also showed that positive earnings changes tend to persist whereas negative earnings changes show a marked tendency to reverse. The conclusion of this paper is that earnings are timelier in reporting publicly available bad news about future cash flows than good news. 4 Discussion of Conditional and Unconditional Conservatism: Concepts and Modeling Sudipta Basu Algebraically model, simulate and graph the effects of various factors on the nonlinear earnings-return relation induced by conditional conservatism. 2005 5 The Timeliness of Income Recognition by European Companies: An analysis of Institutional and Market Complexity Ivana Raonic, Stuart McLeay, I oannis Asimakopoulos Analyze of the asymmetric timeliness of income recognition of good and bad news in the earnings of 366 European firms between 1987 and 1999 2004 6 Discussion of The Timeliness of Income Recognition by European Companies: An analysis of Institutional and Market Complexity Bill Rees 2004 7 Asymmetric timeliness of accounting conservatism J. R. Dietrich, K. A. Muller III, E. J. Riedl Research on the relationship between earnings and stock returns to examine whether bad news is incorporated into earnings on a more timely basis than good news. 2007 8 International Differences in the Timeliness, Conservatism, and Classification of Earnings Peter F. Pope , Martin Walker ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€š Analyze of the differences in the timeliness of income recognition between the U.S. and U.K. GAAP financial reporting regimes 1999 9 Econometrics of the Basu Asymmteric Timeliness Coefficient and The Accounting Conservati sm. (Working Paper) Ray Ball, S. P. Kothari, Valeri Nikolaev Analysis of the econometrics of the Basu asymmetric timeliness coefficient. The analysis addresses the conceptual and econometric challenges to the measure raised in the recent literature. First Draft : May 2006, Current version April 2009

Life, Liberty, And The Pursuit Of Happiness - 902 Words

As a citizen of the United States, you are entitled to life, liberty, and the pursuit of happiness. This is a VIRTUE that everyone embarks on; however, what if you were told you were doing it wrong? Aristotle begins his STORY stating that â€Å"EVERY art and every inquiry, and similarly every action and pursuit, is thought to aim at some good; and for this reason the good has rightly been declared to be that at which all things aim.† He goes on to say then, because these ends at which we aim are only subordinate goods, there must be a supreme form of good in which these subordinate ones lead us, which is the highest end. Everyone could agree that happiness is this â€Å"final end† we reach for; however, people fail to understand the true meaning of happiness, consequently, never truly achieving it. With this being an issue and also holding great importance to Aristotle, he wrote a whole book about it: Nicomachean Ethics. 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Essay on Leadership Model

Question: Write about the Essay on Leadership Model. Answer: Introduction A leader is a mentor with vision, who thrives on challenges. He is a person who holds and guides the organization and its members with their competence. He should have an inspiring imagination and clear goals. He should be creative and should also recognize the inputs from his team mates. The most essential quality that a leader must have is ability to encourage and motivate. He must inspirit his team mates to strive harder to achieve organizational goals along with personal goals. It is not that these mere qualities make somebody a good leader but Leadership is an art of leading others to deliberately create a result that wouldnt have happened otherwise. Effective leadership is to lead other by examples and by collaborating; a leader should also be a good follower. A leadership model represents the desired qualities of a leader, it predict the outcomes of leadership. There is no single formula that could produce effective leadership because what might be useful and apt in one situation might not be useful in another (Shriberg and Shriberg, 2011). Leadership has a mutli-dimensional approach to situations. Effective leadership requires great understanding of human behaviour, because a leader has to deal with people from different backgrounds, sexuality, religion and lifestyle (Goleman, 2011). A leader has to be a good follower in order to lead others (Shriberg and Shriberg, 2011). Effective leader values opinion of the other people and in order to arrive at a decision he should be able to follow the opinion of other people. A true leader is always ethical in nature; he values the truth and knows the ethical implications on the decision making. Most importantly, every leader has a different style of leading people but what is considered essential is the ability to collaborate with people (Shriberg and Shriberg, 2011). The leadership model developed in this case which is presented ahead is named as Representative leadership model. A leadership model runs on ample of ideas but the main ideas of the Representative leadership model developed are, Ethics- a leader in this model has to be ethical. He needs to preach and practice high standards of ethics in his leadership style (Shriberg and Shriberg, 2011).. He should value the truth and that should be reflected in the decisions taken by him. He should not be biased towards any team mate. The next idea is Multiculturalism, which means that the leader should be able to lead people of diverse cultures, sexuality, and background with ease (Shriberg and Shriberg, 2011).. A multicultural leader would be able to achieve sustainable global competitive advantage for the organization (Shriberg and Shriberg, 2011). Next and the most important aspect of this leadership model is Power. A leader must be able to handle his power with great responsibility. Delegation of work and responsibility and the best use of the power is what determine the success of the organization. He mus t not only use his power to get efficient results but must also build human relations. Teamwork is the key of any leadership model. If a leader is not a team player, the organization would find it difficult to achieve full potential of the employees. A leader has to think for the team and the organization as a whole, he must not strive for personal glory but for the betterment of the organization (Shriberg and Shriberg, 2011). A leader must have his own philosophy on how to lead people. His personal beliefs, values and principles form an important aspect in his leadership style. His belief in human nature and fundamentals on relationship is important for the growth of the organization. There are several important traits of an effective leader such as representing the entire organization, aligning personal goals with organizational goals, being a support system, guide and a friend of the team mates (Johansen, 2012). An effective leader promotes two way communications and values the inputs from his team mates. He has a vision and clear goals. He plans strategically and critically analyses the situation. The most important trait of an effective leader is emotional intelligence (Bradberry, Greaves, 2009). The core value of the Representative leadership model designed are Emotional intelligence that equips the leader to understand and effectively deal with the emotions of his team mates. Another value is that the leader is ethical and a team player. He leads his followers by examples and isnt ashamed to learn something from them. Another core vale includes innovation and strategic planning. A leader as per this model should be a problem solver and highly motivated perso nnel who encourages his team mates to strive for better results. The aim of representative leadership model is to create such leadership patterns that it generates better results and increases the efficiency of the organization. It also aims to create a guideline that will help a leader of any organization to adapt few traits in his leadership style. The model suggests that the leader should be emotionally equipped which will help him in dealing with people from diverse backgrounds and it will also help him in building better relations with his team. Emotional intelligence will allow the leader to empathise with his team mates and that will create a good bond between them. Like any other leadership model, this model also aims to increase organizational efficiency at wholesome level. It also aims to create a better working environment for the people along with sustainable growth. The model also aims at promoting inclusion, innovation, and integrity in an organization. When an organization undertakes the representative leadership model, it will help them in achieving better results. The efficiency and effectiveness of an organization increases when it follows inclusion, innovation and integrity. The employees feel a part of the organization when they have a say in the decision making process and are treated with respect and equality, and this in turn increases employee retention and satisfaction level. A leader when equipped with emotional intelligence and intelligence quotient tends to make better decisions than the leader who is not emotionally equipped. The overall aim of any organization is to achieve sustainable growth. This model will help them in better decision making, strategic planning, and dealing effectively with people, all of which are important components to achieve sustainable growth. When a leader is self aware, he also becomes aware of the organizational strength and weakness, this will help him in making better decisions and to g rasp the potential opportunities and eliminate or reduce the impact of risk, this will help the organization to be more effective. The Representative model of leadership is not very dissimilar with the Team Leader model of leadership. In the team leader model, a leader has both concern for people and concern for results. The leader is strong on people and is also strong on tasks. Similarly in the representative model suggests that the leader leads by examples and maintains a positive outlook. He is a team player and encourages his team mates to achieve better results by using their full potential. He strengthens the bond of his team mates with the organization. He plans strategically, thinks critically and also is emotionally equipped to understand human behaviour of diverse backgrounds and cultures. This leadership model is similar to team leader because both the models respect the diversity, values opinions and inclusion, gives importance to ethical behaviour and believes that a leader is a goal seeker and should lead people effectively to achieve better results. Representative model could be applied personally as well as professionally to any individual or organization. The values of this model would enable a leader to adapt a few traits in his leadership style. It will enable a leader to lead the organization, lead others as well as in leading himself (Kesler and Kates, 2010). This model has improved my leadership skills; it had equipped me emotionally and has given me an insight as to why it is important for a leader to be emotionally intelligent while making decisions. It has provided me with better understanding of human behaviour. It will also benefit others around me in understanding the human psychology and behaviour. This will create a positive impact and would make the overall environment positive. This model would also enable a leader to improve the efficiency of himself and those around him, leading to overall increment in the efficiency. Effective leadership is an integral aspect when it comes to the organizational effectiveness and growth. A leader has to have few essential skills and traits to lead the organization effectively (Janet, 2006). The leadership model developed in this case is representative model which is very similar to team leader model of leadership. Leaders, who follow either of the two models, have concern for people along with concern for results. The representative model aims to strengthen employee retention and satisfaction level which will also lead to increment in efficiency of the organization as a whole. It also aims at sustainable growth of the organization. The core values of this model are integrity, inclusion and innovation. This model could be applied to an individual personally as well as professionally. If a person has traits of this model and values that this models works on then that person could be an effective leader and could lead himself, the people around him and an organizatio n on the path of success. References Bradberry, T. and Greaves J. (2009). Emotional Intelligence 2.0 [Online]. US:TalentSmart. Available at: URL https://books.google.co.in/books?id=JAP8B7R67K0Cdq=emotional+intelligence++self+awarenesssource=gbs_navlinks_s [Accessed 26 September 2016]. Goleman, D. (2011). Leadership: The Power of Emotional Intelligence [Online]. US: More than Sound. Available at: URL https://books.google.co.in/books?id=j694twAACAAJdq=emotional+intelligence+leadershiphl=ensa=Xved=0ahUKEwipzrnK65XPAhWMuY8KHU3uB38Q6AEIKjAB [Accessed 26 September 2016]. Janet. (2006). Effective Leadership And Management In The Early Years. [Online]. UK: McGraw-Hill Education. Available at: URL https://books.google.co.in/books?id=po8w991YH7oCprintsec=frontcover#v=onepageqf=false [Accessed 26 September 2016]. Johansen, R. Leaders Make the Future: Ten New Leadership Skills for an Uncertain World Bk Business. [Online]. US: Berrett-Koehler Publishers. Available at: URL https://books.google.co.in/books?id=LlxylEqqrdwCprintsec=frontcover#v=onepageqf=false [Accessed 26 September 2016]. Kesler, G. and Kates, A. (2010). Leading Organization Design: How to Make Organization Design Decisions to Drive the Results You Want. [Online]. US: John Wiley Sons. Available at: URL https://books.google.co.in/books?id=Kcms9azeirgCprintsec=frontcover#v=onepageqf=false [Accessed 26 September 2016]. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p3. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p5. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p6. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p6. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p7. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p8. Shriberg, D. and Shriberg A. (2011). Practicing Leadership Principles and Applications. US: John Wiley Sons, Inc., p5.

King Lear, By William Shakespeare, Is A Tragic Tale Of Filial Conflict

King Lear, by William Shakespeare, is a tragic tale of filial conflict, personal transformation, and loss. The story revolves around the King who foolishly alienates his only truly devoted daughter and realizes too late the true nature of his other two daughters. A major subplot involves the illegitimate son of Gloucester, Edmund, who plans to discredit his brother Edgar and betray his father. With these and other major characters in the play, Shakespeare clearly asserts that human nature is either entirely good, or entirely evil. Some characters experience a transformative phase, where by some trial or ordeal their nature is profoundly changed. We shall examine Shakespeare's stand on human nature in King Lear by looking at specific characters in the play: Cordelia who is wholly good, Edmund who is wholly evil, and Lear whose nature is transformed by the realization of his folly and his descent into madness. The play begins with Lear, an old king ready for retirement, preparing to divide the kingdom among his three daughters. Lear has his daughters compete for their inheritance by judging who can proclaim their love for him in the grandest possible fashion. Cordelia finds that she is unable to show her love with mere words: "Cordelia. [Aside] What shall Cordelia speak? Love, and be silent." Act I, scene i, lines 63-64. Cordelia's nature is such that she is unable to engage in even so forgivable a deception as to satisfy an old king's vanity and pride, as we see again in the following quotation: "Cordelia. [Aside] Then poor cordelia! And not so, since I am sure my love's More ponderous than my tongue." Act I, Scene i, lines 78-80. Cordelia clearly loves her father, and yet realizes that her honesty will not please him. Her nature is too good to allow even the slightest deviation from her morals. An impressive speech similar to her sisters' would have prevented much tragedy, but Shakespeare has crafted Cordelia such that she could never consider such an act. Later in the play Cordelia, now banished for her honesty, still loves her father and displays great compassion and grief for him as we see in the following: "Cordelia. O my dear father, restoration hang Thy medicine on my lips, and let this kiss Repair those violent harms that my two sisters Have in reverence made." Act IV, Scene vii, lines 26-29. Cordelia could be expected to display bitterness or even satisfaction at her father's plight, which was his own doing. However, she still loves him, and does not fault him for the injustice he did her. Clearly, Shakespeare has crafted Cordelia as a character whose nature is entirely good, unblemished by any trace of evil throughout the entire play. As an example of one of the wholly evil characters in the play, we shall turn to the subplot of Edmund's betrayal of his father and brother. Edmund has devised a scheme to discredit his brother Edgar in the eyes of their father Gloucester. Edmund is fully aware of his evil nature, and revels in it as seen in the following quotation: "Edmund. This is the excellent foppery of the world, that when we are sick in fortune, often the surfeits of our own behaviour, we make guilty of our disasters the sun, the moon, and stars; as if we were villains on necessity; fools by heavenly compulsion; knaves, thieves, and treachers by spherical predominance; drunkards, liars, and adulterers by an enforced obedience of planetary influence; and all that we are evil in, by a divine thrusting on. ... I should have been that I am, had the maidenliest star in the firmament twinkled on my bastardizing." Act I, scene ii, lines 127-137, 143-145. Clearly, Edmund recognizes his own evil nature and decides to use it to his advantage. He mocks the notion of any kind of supernatural or divine influence over one's destiny. Edgar must go into hiding because of Edmund's deception, and later Edmund betrays Gloucester himself, naming him a traitor which results in Gloucester's eyes being put out. Edmund feels not the slightest remorse for any of his actions. Later on, after the invading French army has been repelled, Lear and Cordelia have been taken captive and Edmund gives these chilling words to his captain: "Edmund. Come hither captain; hark. Take thou this note: go follow them to prison; One step I have advanced thee; if thou dost As this instructs