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Financial Accounting Measurement: Instrumentation And Calibration


  • stanley c. w. salvary

    (Canisius College)


In its Conceptual Framework (CF), the Financial Accounting Standards Board (FASB) has not identified the observable phenomena and was not able to identify a single measurement property in financial accounting. While identifying aspects of the observable phenomena in financial accounting, the FASB has indicated that there are five measurement attributes which are used in financial accounting and the result is a mixed-attributes model. Lacking a critical underlying theory, the FASB’s Conceptual Framework is feeble at best in providing guidance for accounting measurement. Devoid of the critical theory, the FASB focuses on prediction rather than explanation and, thereby, has adopted an ‘information perspective’ as opposed to a ‘measurement perspective’ for financial accounting standards. This condition has induced a very serious concern for legislative action on the part of the US Congress. In this paper, investments constitute the observable phenomena in financial accounting and recoverable cost, which is grounded in measurement and not prediction, is the measurement property. This measurement property, which is linked to investments and explicated by the capital budgeting model, provides the logical explanation of the apparent diverse rules in financial accounting and establishes a single attribute model.

Suggested Citation

  • stanley c. w. salvary, 2005. "Financial Accounting Measurement: Instrumentation And Calibration," Finance 0502001, EconWPA.
  • Handle: RePEc:wpa:wuwpfi:0502001
    Note: Type of Document - wps; pages: 34

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    References listed on IDEAS

    1. repec:bla:joares:v:34:y:1996:i:1:p:45-65 is not listed on IDEAS
    2. stanley c. w. salvary, 2005. "The Accounting Variable And Stock Price Determination," Finance 0502011, EconWPA.
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    5. Bowen, Robert M. & DuCharme, Larry & Shores, D., 1995. "Stakeholders' implicit claims and accounting method choice," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 255-295, December.
    6. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
    7. Williamson, Oliver E, 1981. "The Modern Corporation: Origins, Evolution, Attributes," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1537-1568, December.
    8. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
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    More about this item


    Conceptual framework; transaction costs; organizational activity; measurement attribute; present value; realizable value; lower of cost and market value; organizational efficiency; bank-centric financial system;

    JEL classification:

    • G - Financial Economics

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