Title: Financial accounting reform: the need for a 'back to basics' approach for profit measurement and wealth measurement

Authors: John B. Ryan

Addresses: School of Accounting and Finance, University of Wollongong, NSW 2522, Australia

Abstract: By recognising the dual purposes of financial accounting, and developing distinct theories to guide the preparation of financial reports, the apparent internal contradictions in accounting theory can be resolved. Property rights and measurement theory provide the basis for explaining transaction-based profit measurement and funds commitment, and for a statement of wealth measured using market prices. Property rights are recognised in The New Institutional Economics. Going beyond accepted accounting conventions, property rights provide the qualitative, empirical property giving meaning to accounting practice for profit measurement through the 1940s to 1960s. Examples of profit and of wealth measurement are included.

Keywords: financial accounting theory; postulates; principles; property rights; qualitative empirical property; realisation; cost allocation; recoverable cost; wealth measurement; contracts; measurement theory; monetary profit measurement; accounting reform.

DOI: 10.1504/IJEA.2014.060915

International Journal of Economics and Accounting, 2014 Vol.5 No.1, pp.1 - 50

Published online: 07 May 2014 *

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