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On the nature of income measurement: The basic results

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  • JAMES A. OHLSON

Abstract

. This paper reconsiders certain issues raised by Beaver and Demski (1979) regarding the nature of income measurement. Three points are made. First, it is argued that income measurement cannot, and should not be, abandoned. Second, the discussion emphasizes that the (social) usefulness of information does not depend on stockholder unanimity, the optimality of income maximization, and the structure of markets (such as complete markets). As a corollary, no apparent reasons suggest that any of the latter conditions rule out income measurement as providing useful information. Third, the paper shows how one links economic efficiency to income measurement within a standard neoclassical framework. This linkage is of interest because it is weaker than the relationship between income maximization and stockholder unanimity. The analysis contrasts stockholder unanimity theory to efficiency theory. Résumé. Cet article examine certaines questions déjà soulevées par Beaver et Demski (1979) en ce qui concerne la nature de la mesure du bénéfice. Trois points sont soulignés. Premièrement, il est soutenu que la mesure du bénéfice ne peut et ne doit être abandonnée. Deuxièmement, la discussion insiste sur le fait que l'utilité (sociale) de l'information ne dépend ni de l'unanimité au niveau des actionnaires, ni du caractère optimal de la maximisation du bénéfice, ni de la structure des marchés (comme les marchés complets). Comme corollaire, il n'existe pas de raisons apparentes laissant supposer qu'une quelconque des conditions précédentes empêche la mesure du bénéfice de générer de l'information utile. Troisièmement, l'article montre comment il est possible, dans un contexte néo†classique normal, de lier l'efficience économique à la mesure du bénéfice. Ce lien s'avère des plus intéressant d'autant qu'il est plus faible que celui existant entre la maximisation du bénéfice et l'unanimité des actionnaires. L'analyse oppose la théorie de l'unanimité des actionnaires à la théorie de l'efficience.

Suggested Citation

  • James A. Ohlson, 1987. "On the nature of income measurement: The basic results," Contemporary Accounting Research, John Wiley & Sons, vol. 4(1), pages 1-15, September.
    • Handle: RePEc:wly:coacre:v:4:y:1987:i:1:p:1-15
    DOI: 10.1111/j.1911-3846.1987.tb00652.x
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    References listed on IDEAS

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    1. DeAngelo, Harry, 1981. "Competition and Unanimity," American Economic Review, American Economic Association, vol. 71(1), pages 18-27, March.
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    3. Hart, Oliver D, 1979. "On Shareholder Unanimity in Large Stock Market Economies," Econometrica, Econometric Society, vol. 47(5), pages 1057-1083, September.
    4. Ohlson, James A., 1985. "Ex post stockholder unanimity : A Complete and Simplified Treatment," Journal of Banking & Finance, Elsevier, vol. 9(3), pages 387-399, September.
    5. Kunkel, J Gregory, 1982. "Sufficient Conditions for Public Information to Have Social Value in a Production and Exchange Economy," Journal of Finance, American Finance Association, vol. 37(4), pages 1005-1013, September.
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    8. Makowski, Louis, 1983. "Competition and Unanimity Revisited," American Economic Review, American Economic Association, vol. 73(3), pages 329-339, June.
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    Cited by:

    1. Michael Bromwich & Richard Macve & Shyam Sunder, 2010. "Hicksian Income in the Conceptual Framework," Abacus, Accounting Foundation, University of Sydney, vol. 46(3), pages 348-376, September.
    2. Rolf Uwe Fülbier & Joerg‐Markus Hitz & Thorsten Sellhorn, 2009. "Relevance of Academic Research and Researchers' Role in the IASB's Financial Reporting Standard Setting," Abacus, Accounting Foundation, University of Sydney, vol. 45(4), pages 455-492, December.

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