Accrual Accounting for Performance Evaluation

Sunil Dutta () and Stefan Reichelstein ()
Additional contact information
Sunil Dutta: University of California
Stefan Reichelstein: Stanford University

Review of Accounting Studies, 2005, vol. 10, issue 4, No 6, 527-552

Abstract: Abstract This paper examines alternative accrual accounting rules from an incentive and control perspective. For a range of common production, financing and investment decisions we consider alternative asset valuation rules. The criterion for distinguishing among these rules is that the corresponding performance measure should provide managers with robust incentives to make present value maximizing decisions. Such goal congruence is shown to require intertemporal matching of revenues and expenses, though the specific form of matching needed for control purposes generally differs from GAAP. The practitioner oriented literature on economic profit plans (EPP) has made various, and at times conflicting, recommendations regarding adjustments to the accounting rules used for external financial reporting. Our goal congruence approach provides a framework for comparing and evaluating these recommendations.

Keywords: performance management; accrual accounting; managerial incentives (search for similar items in EconPapers)
JEL-codes: D82 M40 M41 (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11142-005-4213-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reaccs:v:10:y:2005:i:4:d:10.1007_s11142-005-4213-6

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-005-4213-6

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().