Decision-Usefulness of Ideal Cost and Ideal Value Accounting for Valuation and Stewardship

Zeitschrift für Betriebswirtschaft (2012), Special Edition Vol 5, p. 161-181

Posted: 18 Sep 2012 Last revised: 2 Oct 2012

See all articles by Dirk Hachmeister

Dirk Hachmeister

University of Hohenheim

Niklas Lampenius

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Martin Staehle

University of Bern - Institute for Accounting

Date Written: February 20, 2012

Abstract

This paper contrasts the decision-usefulness of prototype accounting regimes based on perfect accounting for value, i.e. ideal value accounting (IVA), and perfect matching of cost, i.e. ideal cost accounting (ICA). The regimes are analyzed in the context of a firm with overlapping capacity investments where projects earn excess returns and residual income is utilized as performance indicator. Provided that IVA and ICA systematically differ based on the criterion of unconditional conservatism, we assess their respective decision-usefulness for different valuation- and stewardship-scenarios. Assuming that addressees solely observe current accounting data of the firm, ICA provides information which is useful for valuation and stewardship without reservation whereas IVA entails problems under specific assumptions.

Keywords: Cost accounting, Value accounting, (unconditional) Accounting conservatism, Stewardship, Valuation

JEL Classification: M41, G31, G32

Suggested Citation

Hachmeister, Dirk and Lampenius, Niklas and Staehle, Martin, Decision-Usefulness of Ideal Cost and Ideal Value Accounting for Valuation and Stewardship (February 20, 2012). Zeitschrift für Betriebswirtschaft (2012), Special Edition Vol 5, p. 161-181, Available at SSRN: https://ssrn.com/abstract=2008229

Dirk Hachmeister

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

Niklas Lampenius (Contact Author)

University of Hohenheim - Faculty of Business, Economics and Social Sciences ( email )

Stuttgart, 70593
Germany

Martin Staehle

University of Bern - Institute for Accounting ( email )

Switzerland

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