Recoverable Cost: The Basis Of A General Theory Of Financial Accounting Measurement
AbstractThis paper addresses a very profound question concerning financial accounting. Is financial accounting measurement. as represented by diverse valuation rules. hodgepodge or is it logically developed? Salvary [1985. p.28. Chap. IV] advances and provides a theoretical development of the concept of 'recoverable cost' as the measurement property observed in (underlying) financial accounting measurement. Sa/vary [1989, pp.50-51] maintains that 'recoverable cost' is the center of 'economic gravity' and demonstrates that this valuation is derivable from axioms advanced. This paper provides a rigorous proof that 'recoverable cost' is the observed measurement property underlying financial accounting measurement. This analysis draws upon: (a) the concept of recovery underlying the investment decision and (b) the distinction between decision theory and measurement theory. It establishes recoverable cost as the measurement property in financial accounting and leads to the conclusion that financial accounting measurement is logically developed.
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Bibliographic InfoPaper provided by EconWPA in its series General Economics and Teaching with number 0501004.
Length: 35 pages
Date of creation: 20 Jan 2005
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measurement rules; capital budgeting; realizable value; lower of cost and market; capitalization; depreciation; decision theory; market simulation; asset specificity.;
Find related papers by JEL classification:
- A - General Economics and Teaching
This paper has been announced in the following NEP Reports:
- NEP-ACC-2005-01-23 (Accounting & Auditing)
- NEP-ALL-2005-01-23 (All new papers)
- NEP-CFN-2005-01-23 (Corporate Finance)
- NEP-HPE-2005-01-23 (History & Philosophy of Economics)
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- Kay, John A, 1976. "Accountants, Too, Could Be Happy in a Golden Age: The Accountant's Rate of Profit and the Internal Rate of Return," Oxford Economic Papers, Oxford University Press, vol. 28(3), pages 447-60, November.
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