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Recoverable Cost: The Basis Of A General Theory Of Financial Accounting Measurement

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  • stanley c. w. salvary

    (Canisius College)

Abstract

This paper addresses a very profound question concerning financial accounting. Is financial accounting measurement. as represented by diverse valuation rules. hodgepodge or is it logically developed? Salvary [1985. p.28. Chap. IV] advances and provides a theoretical development of the concept of 'recoverable cost' as the measurement property observed in (underlying) financial accounting measurement. Sa/vary [1989, pp.50-51] maintains that 'recoverable cost' is the center of 'economic gravity' and demonstrates that this valuation is derivable from axioms advanced. This paper provides a rigorous proof that 'recoverable cost' is the observed measurement property underlying financial accounting measurement. This analysis draws upon: (a) the concept of recovery underlying the investment decision and (b) the distinction between decision theory and measurement theory. It establishes recoverable cost as the measurement property in financial accounting and leads to the conclusion that financial accounting measurement is logically developed.

Suggested Citation

  • stanley c. w. salvary, 2005. "Recoverable Cost: The Basis Of A General Theory Of Financial Accounting Measurement," General Economics and Teaching 0501004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpgt:0501004
    Note: Type of Document - pdf; pages: 35
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    References listed on IDEAS

    as
    1. Wells, Mc, 1971. "Axioms For Historical Cost Valuation," Journal of Accounting Research, Wiley Blackwell, vol. 9(1), pages 171-180.
    2. Sunder, S, 1978. "Accuracy Of Exchange Valuation Rules," Journal of Accounting Research, Wiley Blackwell, vol. 16(2), pages 341-367.
    3. F. A. Lutz, 1961. "The Theory of Capital," International Economic Association Series, Palgrave Macmillan, number 978-1-349-08452-4 edited by D. C. Hague, December.
    4. Kay, John A, 1976. "Accountants, Too, Could Be Happy in a Golden Age: The Accountant's Rate of Profit and the Internal Rate of Return," Oxford Economic Papers, Oxford University Press, vol. 28(3), pages 447-460, November.
    5. Douglas C. Hague, 1961. "Summary Record Of The Debate," International Economic Association Series, in: D. C. Hague (ed.), The Theory of Capital, pages 289-403, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    measurement rules; capital budgeting; realizable value; lower of cost and market; capitalization; depreciation; decision theory; market simulation; asset specificity.;
    All these keywords.

    JEL classification:

    • A - General Economics and Teaching

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