A Renewed Interest on the Fundamentals of Accounting: The Impact of the Matching 'Principle' on Earning Attributes

Pietro Fera, Nicola Moscariello and Ettore Cinque

A chapter in Accounting from a Cross-Cultural Perspective from IntechOpen

Abstract: By adopting a 'revenue/expense' model, the matching principle has traditionally played a fundamental role in determining earnings. However, since the 1970s, standard setters have chosen to move to an 'asset/liability' approach to determine income. Some authors argue that these changes in accounting standards have caused a decline in the matching process, exercising a negative impact on the quality of earnings. A contrasting view, however, is that changes in the economic activity have caused the decline in matching. Moreover, according to Barth, there is no 'matching principle'. Indeed, the matching process often leads to the recognition of assets/liabilities of questionable substance and, therefore, cannot be considered an end in itself. The purpose of this chapter is to perform an extensive and systematic literature review on the determinants and consequences of the matching process, examining a topic of major concern for standard setters.

Keywords: accrual accounting; matching principle; revenue/expense model; asset/liability model; earnings attributes (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ito:pchaps:141281

DOI: 10.5772/intechopen.77266

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