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http://ssrn.com/abstract=1854545
 
 

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Conceptual Issues in Financial Reporting


Yuri Biondi


French National Center for Scientific Research (CNRS)

Jonathan C. Glover


Carnegie Mellon University - David A. Tepper School of Business

Karim Jamal


University of Alberta - Department of Accounting, Operations & Information Systems

Prof. James A. Ohlson


Hong Kong Polytechnic University - School of Accounting and Finance

Stephen H. Penman


Columbia University - Department of Accounting

Shyam Sunder


Yale University - School of Management

Eiko Tsujiyama


Waseda University - Graduate School of Commerce

T. Jeffrey Wilks


Brigham Young University

May 27, 2011

University of Alberta School of Business Research Paper No. 2013-686

Abstract:     
Standard setters have sought a conceptual framework to guide development of a consistent set of accounting standards. However, the framework has two key weaknesses. First, it is very broad, lacks a measurement framework, and can be used ex post to justify a wide range of actual accounting standards. Second, all accounting issues are viewed as being conceptual issues. In many cases, we may need a good enough (even arbitrary) standard that coordinates our reporting choices, while at the same time trying to develop some systematic way of choosing measurement methods based on the cost and reliability of those measures.

We examine four key conceptual issues related to consistency that are at the heart of many financial reporting dilemmas: stocks and flows, ex-ante and ex post, conventions and economic substance, and evolution and design by standard setting bodies. Associated with each conceptual issue is an accounting duality; in some cases one side (e.g., stocks) is easier to measure in a reliable manner, while the other side (e.g., flows) is easier to measure in other instances. We suggest that financial reporting would benefit from a willingness to pay attention to both sides, and balance the reliability of measurement in specific issues (a local approach) with broad principles applied across many issues when possible (consistency).

Number of Pages in PDF File: 25

Keywords: Conceptual Framework, Consistency, Verifiability, Conventions

JEL Classification: M41

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Date posted: May 29, 2011 ; Last revised: June 11, 2013

Suggested Citation

Biondi, Yuri and Glover, Jonathan C. and Jamal, Karim and Ohlson, Prof. James A. and Penman, Stephen H. and Sunder, Shyam and Tsujiyama, Eiko and Wilks, T. Jeffrey, Conceptual Issues in Financial Reporting (May 27, 2011). University of Alberta School of Business Research Paper No. 2013-686. Available at SSRN: http://ssrn.com/abstract=1854545 or http://dx.doi.org/10.2139/ssrn.1854545

Contact Information

Yuri Biondi
French National Center for Scientific Research (CNRS) ( email )
ESCP Europe
79, avenue de la Republique
75011 Paris
France
HOME PAGE: http://yuri.biondi.free.fr/
Jonathan C. Glover
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-8499 (Phone)
412-268-6837 (Fax)
Karim Jamal (Contact Author)
University of Alberta - Department of Accounting, Operations & Information Systems ( email )
Edmonton, Alberta T6G 2R6
Canada
780-492-5829 (Phone)
780-492-3325 (Fax)

James A. Ohlson
Hong Kong Polytechnic University - School of Accounting and Finance ( email )
M715, Li Ka Shing Tower
Hung Hom, Kowloon
China
Stephen H. Penman
Columbia University - Department of Accounting ( email )
3022 Broadway
New York, NY 10027
United States
212-854-9151 (Phone)
212-316-9219 (Fax)

Shyam Sunder
Yale University - School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)
203-432-6974 (Fax)
HOME PAGE: http://www.som.yale.edu/faculty/sunder/
Eiko Tsujiyama
Waseda University - Graduate School of Commerce ( email )
1-6-1, Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050
Japan
81-3-5286-2048 (Phone)
81-3-3203-7067 (Fax)
HOME PAGE: http://www.waseda.jp/gradcom/index-e.html
Thomas Jeffrey Wilks
Brigham Young University ( email )
School of Accountancy
526 Tanner Building
Provo, UT 84602 84602
United States
801-422-3930 (Phone)
801-422-0621 (Fax)
HOME PAGE: http://marriottschool.byu.edu/directory/details?id=5337
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