Presenting Discounted Future Cash Receipts and Payments in Financial Statements

Paul Rosenfield

Abacus, 2003, vol. 39, issue 2, 233-249

Abstract: This article is about the commonly asserted view that present value, the discounted amount of future cash receipts and payments, is an attribute of assets and that it ideally should replace acquisition cost as the attribute of assets to present in financial statements. The view is based on faulty extrapolation from economics and the study of finance. Use of present value in connection with the preparation of financial statements does not contribute to performing their basic function, which is to report relevant real world conditions as they exist and existed and relevant financial effects of relevant real world events as they occurred. The view turns discounting into a magical process, it reverses the chronological order of cause and effect, and it unjustifiably substitutes the financial effects of supposed future events for the financial effects of historical events as the raw material of financial statements. The future does not yet exist and such financial events have not yet occurred; the present condition therefore can in no way depend on them. The discounted amount of future cash receipts and payments is not an attribute of assets and it should therefore not replace acquisition cost as the attribute of assets to present in financial statements.

Date: 2003
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1467-6281.00128

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:abacus:v:39:y:2003:i:2:p:233-249

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0001-3072

Access Statistics for this article

Abacus is currently edited by G.W. Dean and S. Jones

More articles in Abacus from Accounting Foundation, University of Sydney
Bibliographic data for series maintained by Wiley Content Delivery ().