ON FINANCIAL ACCOUNTING MEASUREMENT: A RECONSIDERATION OF SFAC 5 BY THE FASB IS NEEDED

Stanley Salvary

Finance from University Library of Munich, Germany

Abstract: 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.

Keywords: capital maintenance; 'cash-in and cash-out' principle; organizing of economic activities; cost efficient means of transacting; uncertain purchasing power; price mechanism; intertemporal transfer of risks; Replacement of non-monetary assets; a venture approach; intersavers' transfer of risks; storage of financial capital; savings account; effectiveness and efficiency in cash management; Hicksian consumption model. (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Pages: 24 pages
Date: 2005-02-19
New Economics Papers: this item is included in nep-acc
Note: Type of Document - wps; pages: 24
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0502015

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