Incompatible theoretical bases underlying accounting standards

Alison Fox, John Grinyer, Alex Russell

Research output: Contribution to journalArticle

Abstract

The paper presents evidence that demonstrates that U.K. and International Accounting Standards require entries in income statements that are sometimes based on a matching approach and sometimes on a valuation approach. It indicates that the two approaches are fundamentally different and that they produce different net income figures that have different meanings. In these circumstances, the imposition of the standards currently required results in figures of net income that have no defined meaning and are therefore potentially confusing. Consequently, one can argue that the regulators have been misguided in failing adequately to differentiate between the two approaches. Each income statement published should be based on a clearly identified model and be interpretable by reference to known assumptions.

Original languageEnglish
JournalJournal of International Accounting, Auditing and Taxation
DOIs
Publication statusPublished - 1 Sep 2004

Keywords

  • balance sheet approach
  • accounting standards
  • matching approach

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