Question: An editor of the Financial Analysts Journal reviewed an earlier

An editor of the Financial Analysts Journal reviewed an earlier edition of this book and made this assertion:
Broadly speaking, accounting numbers are of two types: those that can be measured and those that have to be estimated. Investors who feel that accounting values are more real than market values should remember that, although the estimated numbers in the accounting statements often have a greater impact, singly or together, than the measured numbers, accountants' estimates are rarely based on any serious attempt by accountants at business or economic judgment.
The main reason accountants shy away from precise statements of principle for the determination of asset values is that neither they nor anyone else has yet come up with principles that will consistently give values plausible enough that, if accounting statements were based on these principles, users would take them seriously.

a. Describe what is meant by measurement in accounting.
b. According to this editor, what are the kinds of measurements investors want?
c. Discuss whether the objectives of accountants and investors regarding accounting measurement are reconcilable.

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  • CreatedJanuary 22, 2015
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