nach oben

Journal of Business Economics

Erschienen in:

01.09.2012 | ZfB-Special Issue 5/2012

Decision-usefulness of ideal cost- and ideal value accounting for valuation and stewardship

Erschienen in: Journal of Business Economics | Sonderheft 5/2012

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

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.

Vorheriger Artikel Say on Pay als Neuverhandlung von Managementverträgen, Kommentar zu Göx & Kunz: „Say on Pay – Ein Überblick über Gestaltungsoptionen, ökonomische Konsequenzen und Erkenntnisse aus Empirie und Laborexperimenten“

Nächster Artikel Discussion of “Decision-usefulness of ideal cost- and ideal value accounting for valuation and stewardship”

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Journal of Business Economics

From January 2013, the Zeitschrift für Betriebswirtschaft (ZfB) is published in English under the title Journal of Business Economics (JBE). The Journal of Business Economics (JBE) aims at encouraging theoretical and applied research in the field of business economics and business administration, promoting the exchange of ideas between science and practice.

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

Standard setters refer to both principles: The matching principle, as formulated in SFAC No. 6.146, requires that costs and revenues are jointly considered when resulting from the same transactions or events. In IFRS the notion of matching is related to depreciation as regulated in IAS 16.60, where the depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. The asset/liability-principle is expressed in IFRS F.4.47 of the Conceptual Framework, where “Income is recognised in the income statement when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably.”

Unconditional conservatism is not related to events (Beaver and Ryan2005). Conditional conservatism, on the other hand, implies a different treatment of earnings and losses. Earnings require a higher degree of verification than losses (Basu1997). Alternative terminologies for this dichotomy between unconditional and conditional conservatism are balance sheet vs. income statement conservatism (Ball et al.2000a,2000b), ex-ante vs. ex-post conservatism (Pope and Walker1999), and news-independent vs. news-dependent conservatism (Chandra et al.2004).

The article is also based on Staehle (2012).

Variables referring to the single representative projectp are denoted by lowercase letters; steady-state data by capital letters.

We note that the economic accounting process complies with clean surplus accounting, which is defined as\({bv_t} = {bv_{t - 1}} + {inc_t} - {div_t},\) where any change in book values originates from the income statement\(({inc_t}), \) with\({inc_t} = r \cdot b{v_{t - 1}} + r{i_t},\) or from distributions to owners, i.e. dividends\((di{v_t}).\)

This is satisfied through our assumption of weak growth with\({\lambda _{\;t}} \in \left( {0,1} \right).\)

An upfront recognition of value results in subsequent residual income figures of zero (Bierman1961; Bodenhorn1961). This upfront recognition corresponds to accounting for the value-in-use or value-to-the-business. We do not utilize the term ‘deprival value’, since it refers to replacement-cost, see Zijl and Whittington (2006) for these concepts. Penman (2007, p. 36) promotes value-in-use as a prototype for accounting for value.

Definition 1 corresponds to the definition of conservatism by Rajan et al. (2007, p. 330) given the complementary relation ofri andahc, where\({\vec d^ \bullet } = \left( {d_0^ \bullet ,d_1^ \bullet ,...,d_T^ \bullet } \right)\) is more conservative than\(\vec d = \left( {{d_0},{d_1},...,{d_T}} \right)\) if\(\sum\nolimits_{i = 1}^t {d_i^ \bullet } \ge \sum\nolimits_{i = 1}^t {{d_i}}\) for any\(0 \le t \le T - 1,\) i.e.\(bv_t^ \bullet \le {bv_t},\) for any\(0 \le t \le T - 1.\)

Marginal present value is the complement to marginal cost in a setting where the additional unit of capacity might earn excess returns. It is derived under the assumption that there exist no excess capacities in future periods (Rajan and Reichelstein2009, p. 829).

It should be noted that thempv refers to the period where the additional unit of output is provided. Evaluating the period where the investment decision has to be made requires further discounting.

In our model dividends\({{\textit{DIV}}_T}( {\vec \lambda } )\) are equal to free cash flows\({{\textit{FCF}}_T}( {\vec \lambda } )\) of the firm, i.e.\( {{\textit{DIV}}_T}( {\vec \lambda } ) = {S_T}( {\vec \lambda}) - {I_0}\prod\nolimits_{i = 1}^T {( {1 + {\lambda _i}})} = {{\textit{FCF}}_T}( {\vec \lambda } ). \)

Ball R, Kothari SP, Robin A (2000a) Corrigendum to “The effect of international institutional factors on properties of accounting earnings” [Journal of Accounting and Economics 29 (2000) 1–51]. J Account Econ 30:241–241CrossRef

Ball R, Kothari SP, Robin A (2000b) The effect of international institutional factors on properties of accounting earnings. J Account Econ 29(1):1–51CrossRef

Barth ME (2006) Including estimates of the future in today’s financial statements. Accounting Horizons 20(3):271–285CrossRef

Barth ME (2007) Standard-setting measurement issues and the relevance of research. Account Bus Res 37(3):7–15CrossRef

Basu S (1997) The conservatism principle and the asymmetric timeliness of earnings. J Account Econ 24(1):3–37CrossRef

Beaver WH, Ryan SG (2005) Conditional and unconditional conservatism: Concepts and modeling. Rev Acc Stud 10(2–3):269–309CrossRef

Bierman H (1961) Depreciable assets—timing of expense recognition. Account Rev 36(1):613–618

Bodenhorn D (1961) An economist looks at industrial accounting and depreciation. Account Rev 36(4):583–588

Chandra U, Wasley CE, Waymire GB (2004) Income conservatism in the U.S. technology sector. SSRN eLibrary.

Dutta S, Reichelstein S (2005) Accrual accounting for performance evaluation. Rev Account Stud 10(4):527–552CrossRef

Ewert R, Wagenhofer A (2000) Rechnungslegung und Kennzahlen für das Wertorientierte Management. In: Wagenhofer A, Hrebicek G (eds) Wertoprientiertes management. Schäffer-Poeschel, Stuttgart, pp 3–64

FASB (2008) Statements of financial accounting concept 6. Retrieved from http://www.fasb.org

Feltham GA, Ohlson JA (1995) Valuation and clean surplus accounting for operating and financial activities. Contemp Account Res 11(2):689–731CrossRef

Hitz J-M (2007) The decision usefulness of fair value accounting—a theoretical perspective. Eur Account Rev 16(2):323–362CrossRef

Hotelling H (1925) A general mathematical theory of depreciation. J Am Stat Assoc 340–353

IASB (2000) International accounting standard 16. Retrieved from www.ifrs.org

IASB (2010) Conceptual framework. Retrieved from www.ifrs.org

Laux C, Leuz C (2009) The crisis of fair-value accounting: making sense of the recent debate. Account Org Soc 34(6/7):826–834CrossRef

Lücke W (1955) Investitionsrechnung auf der Basis von Ausgaben oder Kosten? Z Handelswirtsch Forschung 7:310–324

Mohnen A, Bareket M (2007) Performance measurement for investment decisions under capital constraints. Rev Account Stud 12(1):1–22CrossRef

Nezlobin A (2010) Accrual accounting, informational sufficiency, and equity valuation. Working paper Stanford University

Nissim D, Penman SH (2008) Principles for the application of fair value accounting. Columbia business school: Centre for Excellence in Accounting and Security Analysis (CEASA)

Ohlson JA (1995) Earnings, book values, and dividends in equity valuation. Contemp Account Res 11(2):661–687CrossRef

Penman SH (2007) Financial reporting quality: is fair value a plus or a minus? Account Bus Res 33–44 (Special Issue: International Accounting Policy Forum)

Pope PF, Walker M (1999) International differences in the timeliness, conservatism, and classification of earnings. J Account Res 37(3):53–87CrossRef

Preinreich GAD (1938) Annual survey of economic theory: the theory of depreciation. Econometrica 6:219–241CrossRef

Rajan MV, Reichelstein S (2009) Depreciation rules and the relation between marginal and historical cost. J Account Res 47(3):823–865CrossRef

Rajan MV, Reichelstein S, Soliman MT (2007) Conservatism, growth, and return on investment. Rev Account Stud 12:325–370CrossRef

Reichelstein S (1997) Investment decision and managerial performance evaluation. Rev Account Stud 2:157–180CrossRef

Reichelstein S (2000) Providing managerial incentives: cash flows versus accrual accounting. J Account Res 38(2):243–269CrossRef

Rogerson WP (1997) Intertemporal cost allocation and managerial investment incentives: a theory explaining the use. J Polit Econ 105(4):770–795CrossRef

Rogerson WP (2008) Intertemporal cost allocation and investment decisions. J Polit Econ 116(5):931–950CrossRef

Ronen J (2008) To fair value or not to fair value: a broader perspective. Abacus 44(2):181–208CrossRef

Staehle M (2012) The informational sufficiency of accounting data. Stuttgart-Hohenheim

van Zijl T, Whittington G (2006) Deprival value and fair value: a reinterpretation and a reconciliation. Account Bus Res 36(2):121–130CrossRef

Titel: Decision-usefulness of ideal cost- and ideal value accounting for valuation and stewardship
Publikationsdatum: 01.09.2012
Erschienen in: Journal of Business Economics / Ausgabe Sonderheft 5/2012
Print ISSN: 0044-2372
Elektronische ISSN: 1861-8928
DOI: https://doi.org/10.1007/s11573-012-0604-x

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Journal of Business Economics

Springer Professional "Wirtschaft"

Weitere Artikel der Sonderheft 5/2012

Auditing, consulting, and audit market concentration

Die Rolle des Bilanzrechts in der aktuellen Corporate Governance-Diskussion

Corporate Governance, Regulierung und Rechnungslegung

Say on Pay: Ein Überblick über Gestaltungsoptionen, ökonomische Konsequenzen und Erkenntnisse aus Empirie und Laborexperimenten

Payout policy, taxes, and corporate insiders: evidence from the German Tax Reduction Act 2001

Wird die Relevanz von Ertragsteuern für die Unternehmensrechnung nach rechtlichen oder ökonomischen Kriterien beurteilt? Kommentar zum Beitrag von Franz W. Wagner und Reinhard Sill

Premium Partner