Business, Management and Accounting
4 years ago

New Accounting Rules Could Impact How Companies Report Income

CIRJE J-Series
"Income Concept, Fair Value Accounting and Realization Principle"(in Japanese)
Shizuki Saito

Paper Summary

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The article discusses how income in business accounting should reflect realized income based on actual cash flows. It argues that reporting income through fair value accounting is acceptable only if future cash flows can be converted into present cash flows. However, this does not apply to financial instruments tied to specific businesses, like certain liabilities. Recognizing gains and losses based on fair value measurements may not accurately reflect realized income. The study suggests that net income should not be calculated solely based on changes in asset values, but rather on actual cash flows.