Accounting Alchemy

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


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,

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

JEL Classification: M00, M40, G30, G14

Suggested Citation

Verrecchia, Robert E., Accounting Alchemy (March 2010). BIS Working Paper No. 302. Available at SSRN: or

Robert E. Verrecchia (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-6976 (Phone)
215-573-2054 (Fax)

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