Financial Accounting Information And The Relevance/Irrelevance Issue
AbstractSome current research conclude that the numbers in financial statement are not relevant for three basic reasons. The numbers: (1) are not isomorphic1 with capital market values, (2) do not have a future orientation, and (3) are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un-interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0502016.
Length: 43 pages
Date of creation: 21 Feb 2005
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capital market values; Basle Capital Accord; value of marketable securities; technical insolvency effect; the high-technology and dot-com firms; security returns; short-term earnings management; 'new economy'; Total Value Creation; liquidity of insurance industry; causative choice; speculative choice; goodwill impairment; financial analysis;
Find related papers by JEL classification:
- G - Financial Economics
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