Quality of earnings questions arise when firms that practice conservative accounting change the level of their investment in net operating assets: increases in net operating assets create quot;hidden reserves,quot; depressing earnings, and decreases in investment release hidden reserves into...

This paper studies the accounting treatment of uncertainty and how it affects a firm's capital structure. We distinguish two sources of uncertainty that raise reliability concerns: inherent uncertainty and incentive uncertainty. By inherent uncertainty, we refer to uncertainty about the quality...

This paper examines how conservative accounting affects the relation between accounting data and firm value. The analysis shows that conservative accounting can be characterized equivalently in terms of book value, earnings, or book rate of return. Furthermore, capitalized earnings generally...

The principles that govern the recognition of revenues (and expenses) are the key determinants of the properties of accrual accounting information. This paper studies the revenue recognition question from a stewardship perspective. Our results show that it is optimal to carry products at their...