TAILIEUCHUNG - The Pure Logic of Accounting: A Critique of the Fair Value Revolution

Concentrating ownership allows firms to limit their information disclosure to the public. Opacity is a good strategy because it prevents leakage of proprietary information to competitors and allows firms to avoid unwanted political or social scrutiny. Firms with proprietary knowledge and specific human capital tend to concentrate their ownership and decision rights in the individuals who possess the specific knowledge (Jensen and Meckling, 1992; Christie, Joye, and Watts, 1993). Assigning control to individuals without specific knowledge can lead to suboptimal decisions or a high cost of transferring knowledge to necessary individuals. Moreover, if firms with proprietary knowledge give more individuals decision rights, they also have to give those. | Accounting Economics and Law A Convivivium Volume 1 Issue 1 2011 Article 7 The Pure Logic of Accounting A Critique of the Fair Value Revolution Yuri Biondi CNRS France Recommended Citation Biondi Yuri 2011 The Pure Logic of Accounting A Critique of the Fair Value Revolution Accounting Economics and Law Vol. 1 Iss. 1 Article 7. Available at http ael vol1 iss1 7 2011 Accounting Economics and Law - A Convivivium. All rights reserved. The Pure Logic of Accounting A Critique of the Fair Value Revolution Yuri Biondi Abstract When international accounting standards were renamed to become international financial reporting standards this seemed to imply that accounting no longer needed to exist but rather had to be reconsidered as a part of financial communication and advertising. Does traditional accountability no longer matter Betrayed investors and globalized stakeholders would dissent. A difference of nature continues to exist between fair values disclosed by managers and certified by auditors and the actual performance generated by the enterprise entity through time space and interaction. In a world shaped by complex organizations facing unfolding changes hazard and limited knowledge the quest for fundamental principles of accounting is not academic. Accounting principles constitute a primary way that the creation and allocation of business incomes is governed that is fairly managed and regulated in the public interest having respect to other people interests. This article adopts a dualistic posture that opposes the accounting conceptual frameworks based on fair value market basis and historical cost and revenue process basis . The fundamental premises about the underlying economics of the enterprise entity are discussed including the representation of the business and the concepts of asset and liability. References are made to the case of accounting for intangibles and to the distinction between equities and liabilities. The cost and revenue accounting

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