Accounting Alchemy

Verrecchia, Robert E.

doi:10.2139/ssrn.1599483

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Accounting Alchemy

BIS Working Paper No. 302

31 Pages Posted: 5 May 2010

See all articles by Robert E. Verrecchia

Robert E. Verrecchia

University of Pennsylvania - Accounting Department

Date Written: March 2010

Abstract

The controversy about the choice among accounting alternatives is often based on arguments suggesting heuristic behaviour by market participants and firm managers. Debates focus on whether accounting methodology systematically alters reported earnings and whether this effect may add or subtract economic value independently of any effect on underlying cash flows. Arguments based on heuristic behaviour of firms’ management and investors influence decisions about the applicability of standards and regulation. See also, http://ssrn.com/abstract=1699600.

Keywords: Earnings reporting, heuristic behaviour, fair value, disclosure

JEL Classification: M00, M40, G30, G14

Suggested Citation: Suggested Citation

Verrecchia, Robert E., Accounting Alchemy (March 2010). BIS Working Paper No. 302, Available at SSRN: https://ssrn.com/abstract=1599483 or http://dx.doi.org/10.2139/ssrn.1599483