On Capital Budgeting And Income Measurement

On Capital Budgeting And Income Measurement Key words: Capital budgeting; Fixed assets (ACC); Accounting theory. I The recent proposal by Chambers [1977] for taking account in project appraisals of changes in exit-values of assets has been the subject of critical comment by Ma, Pandy and Scott [1978], a response by Chambers [1978],a further comment by Peasnell[1979] and a rejoinder by Ma and Scott [1980]. Ma and his colleagues argue that Chambers’ Discounted Cash Equivalents (DCEF) model gives misleading results because it is based on incorrect assumptions concerning the timing of the opening cash equivalents. Peasnell argues that the DCEF model doublecounts benefits and also fails to take proper account of differences in risk between projects. Both Ma et al. and Peasnell point out that conventional methods, used properly, are quite up to the job of making allowances for relevant differences in asset backing of projects. The central problem of concern to Chambers [1977] remains unresolved by these commentators: How does one ensure that investment planning and subsequent accounting reports of performance are on the same footing? If, for example, subsequent accounting reports are prepared according to Continuously Contemporary Accounting (CoCoA), as Chambers suggests, whereas investment plans are formulated in terms of operating cash flows http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Abacus Wiley

On Capital Budgeting And Income Measurement

Abacus, Volume 17 (1) – Jun 1, 1981

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Publisher
Wiley
Copyright
Copyright © 1981 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0001-3072
eISSN
1467-6281
D.O.I.
10.1111/j.1467-6281.1981.tb00101.x
Publisher site
See Article on Publisher Site

Abstract

Key words: Capital budgeting; Fixed assets (ACC); Accounting theory. I The recent proposal by Chambers [1977] for taking account in project appraisals of changes in exit-values of assets has been the subject of critical comment by Ma, Pandy and Scott [1978], a response by Chambers [1978],a further comment by Peasnell[1979] and a rejoinder by Ma and Scott [1980]. Ma and his colleagues argue that Chambers’ Discounted Cash Equivalents (DCEF) model gives misleading results because it is based on incorrect assumptions concerning the timing of the opening cash equivalents. Peasnell argues that the DCEF model doublecounts benefits and also fails to take proper account of differences in risk between projects. Both Ma et al. and Peasnell point out that conventional methods, used properly, are quite up to the job of making allowances for relevant differences in asset backing of projects. The central problem of concern to Chambers [1977] remains unresolved by these commentators: How does one ensure that investment planning and subsequent accounting reports of performance are on the same footing? If, for example, subsequent accounting reports are prepared according to Continuously Contemporary Accounting (CoCoA), as Chambers suggests, whereas investment plans are formulated in terms of operating cash flows

Journal

AbacusWiley

Published: Jun 1, 1981

References

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