Risk in Accounting

13 Pages Posted: 18 Jan 2016

See all articles by Shyam Sunder

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

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Date Written: December 2015


Risk and uncertainty are inherent in the environment and functions of accounting. Accounting reports, systems, norms, and rules help people decide, and also determine how they decide in such an environment. Diverse normative theories and descriptions of coping with risk and uncertainty yield different implications for accounting. Chambers was an articulate, forceful, and celebrated proponent of market values, while Ijiri did the same for historical costs. Elements of accounting theory that diverge in their emphases on historical cost versus market values can be linked to the divergence in the theories of risk and decision making. This largely unrecognized link between the conflicting accounting theories and their respective implicit assumptions about risky decisions may help us reconcile, understand, and progress beyond the accounting debates of the past century.

Keywords: Accounting, Chambers, Financial reporting, Information for decisions, Risk and uncertainty

Suggested Citation

Sunder, Shyam, Risk in Accounting (December 2015). Abacus, Vol. 51, Issue 4, pp. 536-548, 2015. Available at SSRN: https://ssrn.com/abstract=2716398 or http://dx.doi.org/10.1111/abac.12060

Shyam Sunder (Contact Author)

Yale University - School of Management ( email )

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HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

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