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Including estimates of the future in today's financial statements


  • Mary Barth

    (Stanford Graduate School of Business)


This paper explains why the question is how, not if, today's financial statements should include estimates of the future. Including such estimates is not new, but their use is increasing. This increase results primarily because standard setters believe asset and liability measures that reflect current economic conditions and up-to-date expectations of the future will result in more useful information for making economic decisions, which is the objective of financial reporting. This is why standard setters seem focused on fair value accounting. How estimates of the future are incorporated in financial statements depends on the asset and liability measurement attribute, and on financial reporting definitions of assets and liabilities. The present definitions depend on identifying past transactions or events that give rise to expected inflows or outflows of economic benefits and, for inflows, control over the expected benefits. Thus, not all expected inflows or outflows of economic benefits are recognised. Note disclosures can help users understand recognised estimates, and can provide information about unrecognised estimates. Including more estimates of the future in today's financial statements would result in an income measure that differs from today's income, but arguably provides better information for making economic decisions.

Suggested Citation

  • Mary Barth, 2006. "Including estimates of the future in today's financial statements," BIS Working Papers 208, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:208

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    References listed on IDEAS

    1. Nelson, Karen K. & Barth, Mary E. & Cram, Donald, 2001. "Accruals and the Prediction of Future Cash Flows," Research Papers 1594r, Stanford University, Graduate School of Business.
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    More about this item


    financial statements; fair value; financial reporting;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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