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On Financial Accounting Measurement: A Reconsideration Of Sfac 5 By The Fasb Is Needed

  • Stanley C. W. Salvary

This paper attempts to reinforce by means of social theory the procedure and property (attribute) of financial accounting measurement advanced by Salvary [1985,1989,1992]. The procedure entails estimating the amount of cash flows derivable from existing investment projects; and the measurement property (attribute) is identified as recoverable cost. The 'cash-in and cash-out' principle establishes financial capital maintenance as the appropriate capital maintenance concept to be followed in the measurement of periodic income. An analogy between a bank savings account and an equity security is used to identify the measurement property (attribute) and validate the additivity of financial accounting numbers. Problems with the monetarist model were used to demonstrate the appropriateness (stability) of the measurement scale (monetary unit). The logical analysis developed in this paper makes a compelling case for a reconsideration of Statement of Financial Accounting Concept No. 5 by the FASB.

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File URL: http://128.118.178.162/eps/fin/papers/0502/0502015.pdf
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Paper provided by EconWPA in its series Finance with number 0502015.

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Length: 24 pages
Date of creation: 19 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0502015
Note: Type of Document - wps; pages: 24
Contact details of provider: Web page: http://128.118.178.162

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  1. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  2. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
  3. Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-36, December.
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