Category Archives: Accounting Issues

Paradigm Revision

Thomas Kuhn talks about a “paradigm shift” through first principles that end up subject to later challenge and consequent “revolutionary” abandonment. Either the world is flat or it isn’t. Either the earth orbits around the sun or it doesn’t. However, … Continue reading

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Fama

Eugene Fama. Almost Lama Fama, to some. Economist, with major influence on accounting research. Efficient markets From a grounded life

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Power Theory

In Accounting Theory, there is a “power theory of executive compensation”. Part of accounting research aimed at demonstrating the relevance of accounting information to executive compensation arrangements. As summarized by William R. Scott (2015): The power theory was set forth … Continue reading

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Missing The Blend

In Accounting Theory, so much research relating to efficiency of contracts and how to develop contract that best motivates manager to act in the best interest of business owners. Such a major research focus on the part of so many … Continue reading

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Shared Illusion

This idea that earnings management, represented by smoothing earnings, can somehow be a good thing, as here: …firms may smooth reported net income for external reporting purposes. If used responsibly, smoothing can convey inside information to the market by enabling … Continue reading

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Ball and Brown

Seminal study in accounting research. Published in 1968, using data from 1957 to 1965. Ray Ball and Philip Brown, “An Empirical Evaluation of Accounting Income Numbers“, Journal of Accounting Research (Autumn, 1968), pp. 159-178. Basic idea being that if income … Continue reading

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Accounting Relevance II

They don’t know Like I know Previous queries in relation to whether accounting information is all that relevant to investment decisions. Then to W.R. Scott, Financial Accounting Theory (7th ed.) and (at p. 154): …it does seem that accounting information … Continue reading

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