Margins of Error in Accounting

by Myddelton, David R.

• ISBN13: 9780230219915
• ISBN10: 0230219918
• Format: Hardcover
• Copyright: 2009-02-15
• Publisher: Palgrave Macmillan

Summary

Margins of Error in Accountingcovers the main reasons why published company accounts cannot be completely 'accurate' and the likely extent of the resulting errors. Separate chapters cover: the 'interim-ness' of accounts;#xA0;the use of current value estimates; the cumulative effect of inflation on money as the unit of account.

Author Biography

D. R. MYDDLETON has been Professor of Finance and Accounting at the Cranfield School of Management, UK since 1972 (Emeritus since retiring in 2005). He has written books on the British tax system, inflation accounting and accounting standards. He is Chairman of the Trustees of the Institute of Economic Affairs.

Table of Contents

List of Figures	p. viii
List of Tables	p. ix
Acronyms	p. x
Preface	p. xii
Postscript	p. xiv
Introduction	p. 1
Accounting rules	p. 1
Inputs and outputs	p. 3
Is too much expected of accounts?	p. 4
Quantifying margins of error	p. 6
Causes and types of error	p. 8
Simple mistakes	p. 10
The æInterim-ness' of Accounts	p. 12
Introduction	p. 12
Fixed assets - tangible	p. 16
Current assets	p. 23
Liabilities	p. 26
Sales revenue	p. 29
Revenue investments	p. 30
Taxation	p. 33
Conclusions	p. 35
Basis of Measurement	p. 36
The purpose of accounts	p. 36
Realised and unrealised profits	p. 40
Technical aspects of Current Value accounting	p. 41
Implications of Current Value accounting	p. 44
Revaluation of tangible fixed assets	p. 51
Goodwill	p. 52
Cash and liquid resources	p. 55
Executive stock options	p. 56
Provision for pensions	p. 57
Discounting long-term liabilities	p. 58
Derivatives	p. 59
Conclusions	p. 60
The Unit of Account	p. 61
Money and inflation	p. 62
Constant Purchasing Power accounting	p. 69
Lucas Industries plc, CPP accounts 1969-94	p. 79
Foreign currencies	p. 82
Conclusions	p. 84
Accounting Profit Versus Economic Income	p. 85
Economic income	p. 86
Historical cost accounting profit versus economic income	p. 89
Interest on equity capital	p. 91
Creative Accounting	p. 95
What is æcreative accounting'?	p. 95
Incentives and pressures on managers	p. 98
Profit and loss account	p. 101
Balance sheet	p. 104
Presentation and trends	p. 107
Politics	p. 109
Fraud	p. 112
Non-public and non-profit-seeking entities	p. 113
Conclusions	p. 114
Spurious Accuracy	p. 116
Accounting	p. 116
Finance	p. 122
Economics	p. 128
Miscellaneous	p. 131
Near Enough	p. 134
Accounting	p. 134
Sports	p. 136
Weather	p. 139
Political elections	p. 140
Transport	p. 141
Miscellaneous	p. 142
Back to accounting	p. 143
Conclusions	p. 145
Introduction	p. 145
Interim-ness	p. 146
Basis of measurement	p. 147
The unit of account	p. 148
Accounting profit versus economic income	p. 150
Creative accounting	p. 150
Spurious accuracy	p. 151
Near enough	p. 152
Mis-reporting profit	p. 152
Preventing avoidable error	p. 153
Bibliography	p. 155
Glossary	p. 159
Name Index	p. 160
Subject Index	p. 163
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