Financial accounting information and the relevance/irrelevance issue

Stanley Salvary

Global Business and Economics Review, 2003, vol. 5, issue 2, 140-175

Abstract: Some current research concludes that the numbers in financial statement are not relevant for three basic reasons. The numbers: are not isomorphic with capital market values; do not have a future orientation; and are un-interpretable since they are based upon five different measurement attributes. The lack of isomorphism argument is invalid since actual current performance is not identical with the capital market expectations of future performance. The lack of a future orientation argument is invalid since financial statements capture what has happened and not what is expected to happen. Since a single measurement attribute is required to produce meaningful measures, the un-interpretability argument holds. A unique measurement attribute is identified in this paper to address this problem.

Keywords: financial accounting measurement; accounting information; cash flows; capital market valuation; financial statements; financial analysis; financial reporting. (search for similar items in EconPapers)
Date: 2003
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Working Paper: FINANCIAL ACCOUNTING INFORMATION AND THE RELEVANCE/IRRELEVANCE ISSUE (2005)
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