Vagueness on the Left Side of Balance Sheet Classification

27 Pages Posted: 4 Feb 2009

See all articles by Ricardo Lopes Cardoso

Ricardo Lopes Cardoso

Brazilian School of Public and Business Administration; Rio de Janeiro State Univ., FAF

Andre C. B. Aquino

University of Sao Paulo - FEARP-USP

Date Written: January 12, 2009

Abstract

We explore the vagueness among property, plant, and equipment (PPE), intangible asset and inventory accounts that leads to liquidity level misrepresentation. Through the configurational approach, we identified five arrangements according to the intensity of property rights transference. Our purpose is to highlight the epistemic vagueness on liquidity order classification of assets' items, in order to justify additional disclosure or other regulation strategies to reduce informational asymmetry. Even though IASB's accounting regulation accepts the presentation of balance sheet (BS) classified by items' liquidity order, the traditional current/non-current classification of BS seems to have been used as a straitjacket, where inventories are current assets, and PPE and intangibles are non-current assets. While the gray zone is ignored, items that lay on that are swept under the rug, information asymmetry persists, and neglected by auditors and standard setters.

Keywords: Classified Balance Sheet, IFRS, Vagueness, Property Rights, Accounting Regulation

JEL Classification: M41, D82, M44, M49

Suggested Citation

Cardoso, Ricardo Lopes and Aquino, Andre C. B., Vagueness on the Left Side of Balance Sheet Classification (January 12, 2009). Available at SSRN: https://ssrn.com/abstract=1326560 or http://dx.doi.org/10.2139/ssrn.1326560

Ricardo Lopes Cardoso (Contact Author)

Brazilian School of Public and Business Administration ( email )

Rua Jornalista Orlando Dantas, 30
Office 206. Botafogo
Rio de Janeiro, Rio de Janeiro 22231-010
Brazil
+55-21 30832713 (Phone)

Rio de Janeiro State Univ., FAF ( email )

Rua Sao Francisco Xavier, 524
bloco B, sala 1024
Rio de Janeiro, Rio de Janeiro
Brazil

Andre C. B. Aquino

University of Sao Paulo - FEARP-USP ( email )

Av. Bandeirantes, 3900 - Monte Alegre
RibeiĆ£o Preto, 14040-900
Brazil
55 16 3602-4972 (Phone)

HOME PAGE: http://www.fearp.usp.br

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