The Measurement
Topic 3
Approach to Decision Ufulness
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What is the Measurement
好心眼儿巨人Approach?
•Greater u of fair values in the financial statements proper清水白萝卜汤
•Two versions of current value
–Exit price: SFAS 157 defines fair value as exit price
–Value-in-u: prent value of future cash
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receipts or payments居室风水
•Goal of measurement approach is to increa decision ufulness by increasing financial statement relevance
Why are Accountants Moving Towards a Measurement Approach?•Securities markets may not be as efficient as previously believed银行大厅
夜雨诗意–To extent markets not fully efficient, a measurement perspective is supported
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•Low R2
–Better measurement may increa accounting “market share” in explaining share price changes
Why are Accountants Moving Towards a Measurement Approach? (Cont’d)•Ohlson’s Clean Surplus Theory
– A theoretical framework supportive of
measurement approach
•Auditor Liability
–Better measurement may reduce auditor liability when firms become financially distresd
