Rev Quant Finan Acc https://doi.org/10.1007/s11156-018-0742-5 ORI G INAL RESEARCH The inﬂuence of uncertainty on the standard-setting decision between fair value and historical cost accounting under asymmetric information Christian Blecher Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract The design of accounting rules by the international standard-setters takes place by considering a trade-off between relevance and reliability. An example for this trade-off is the standard-setting decision between fair value accounting—associated with more relevant information—and historical cost accounting—associated with more reliable information. This paper examines in which way the decision of a standard-setter between fair value and historical cost accounting is inﬂuenced by the uncertainty of the underlying assets, if the standard-setter wants to minimize the social costs of his standard-setting decision. As a ﬁrst step this paper uses a common signaling model: Good ﬁrms—i.e. ﬁrms with high expected cash ﬂows in the future—signal their ﬁrm type to an analyst by using discretionary accruals to manage earnings. As a second step the resulting signaling costs are compared with the analyst’s costs for determining the ﬁrm type by using his own valuation technology. The standard-setter chooses the accounting rule that minimizes the social costs. Keywords Standard-setting Signaling Earnings
Review of Quantitative Finance and Accounting – Springer Journals
Published: May 31, 2018
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera