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Implications for GAAP from an Analysis of Positive Research in Accounting


  • S.P. Kothari

    () (MIT Sloan School of Management)

  • Karthik Ramanna

    () (Harvard Business School, Accounting and Management Unit)

  • Douglas J. Skinner

    () (University of Chicago Booth School of Business)


Based on extant literature, we review the positive theory of GAAP. The theory predicts that GAAP's principal focus is on control (performance measurement and stewardship) and that verifiability and conservatism are critical features of a GAAP shaped by market forces. We recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets, but caution against expanding fair values to financial reporting more generally. We conclude that rather than converging U.S. GAAP with IFRS, competition between the FASB and the IASB would allow GAAP to better respond to market forces.

Suggested Citation

  • S.P. Kothari & Karthik Ramanna & Douglas J. Skinner, 2009. "Implications for GAAP from an Analysis of Positive Research in Accounting," Harvard Business School Working Papers 09-137, Harvard Business School, revised Sep 2010.
  • Handle: RePEc:hbs:wpaper:09-137

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    References listed on IDEAS

    1. anonymous, 2003. "Capital standards for banks: the evolving Basel Accord," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 395-405.
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