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Financial accounting information and the relevance/irrelevance issue

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  • Stanley C. W. Salvary

Abstract

Some current research concludes that the numbers in financial statement are not relevant for three basic reasons. The numbers: are not isomorphic with capital market values; do not have a future orientation; and 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.

Suggested Citation

  • Stanley C. W. Salvary, 2003. "Financial accounting information and the relevance/irrelevance issue," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 5(2), pages 140-175.
    • Handle: RePEc:ids:gbusec:v:5:y:2003:i:2:p:140-175
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