Commentary on 'Accounting for Value' by Stephen Penman

'Accounting, Economics and Law -- A Convivium', 2013

26 Pages Posted: 20 Aug 2013 Last revised: 9 May 2018

See all articles by Giuseppe Marzo

Giuseppe Marzo

University of Ferrara - Department of Economics and Management

Date Written: August 20, 2013

Abstract

'Accounting for Value' by Stephen Penman is thought-provoking in its challenge to mainstream in both finance and accounting. This fosters a reflection on models and tools employed for valuation. Some points about the book should be underlined. Penman states that he adheres to finance theory principles, but he moves away from them, as he offers a complete reinterpretation of such principles from a fundamentalist perspective. He also puts a distance between the finance theory approach and his own. Value is about business, he says, not about paper. The finance approach is focused on paper (stocks, bonds) and neglects business. Knowledge about business and prudence should be adopted by analysts in order to challenge market prices and find profit opportunities. Accrual accounting should be used instead of the discounted cash-flow approach, he says, and therefore 'Accounting for Value' is not only about value but about accounting too. However, Penman argues, good accounting is not the one currently proposed by accounting standards.

Keywords: accounting, value, discounted cash flow, accrual accounting, finance theory

JEL Classification: M40, G30

Suggested Citation

Marzo, Giuseppe, Commentary on 'Accounting for Value' by Stephen Penman (August 20, 2013). 'Accounting, Economics and Law -- A Convivium', 2013 , Available at SSRN: https://ssrn.com/abstract=2313199

Giuseppe Marzo (Contact Author)

University of Ferrara - Department of Economics and Management ( email )

Via Voltapaletto, 11
Ferrara, 44100
Italy

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