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The equity theories and financial reporting: an analysis

Van Mourik, Carien (2010). The equity theories and financial reporting: an analysis. Accounting in Europe, 7(2) pp. 191–211.

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This paper reviews accounting literature in the English language on proprietary and entity theory in order to understand their implications for financial accounting and reporting. Although there is a lack of agreement on the definition and accounting implications of the various equity theories, the literature indicates clear differences between pure proprietary and pure entity perspectives of the firm. These differences particularly relate to the purpose of accounting and financial reporting, the distinction between debt and equity and its accounting implications for the analysis and recording of transactions and recordable events, and the definition, determination, disclosure and distribution of income. The main contribution of this paper is twofold. First, it explains in operational terms why an entity perspective of the company is theoretically irreconcilable with the asset-liability approach to the determination of income. Second, it makes clear that there is always an implicit perspective to financial reporting. Inconsistency in accounting standards results if the implicit perspective is not the same as the perceived focus of decision-usefulness.

Item Type: Journal Item
Copyright Holders: 2010 European Accounting Association
ISSN: 1744-9499
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 26834
Depositing User: Catharina Van Mourik
Date Deposited: 25 Jan 2011 17:15
Last Modified: 07 Dec 2018 09:49
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