Lessons for Accounting Measurement from Transaction Cost Economics

The AARF's Monograph 10 Measurement in Financial Accounting maintains the impetus built up over recent years through the foundation's inquiries into the nature and processes of published financial reports. This commentary concentrates upon two major aspects of financial reporting that are not fully addressed in the Monograph. The first is the general lesson that transaction cost economics offers to those who rely on cuwent market values in preparing accounts for publication. The second is the need for standard-setters to agree on a workable definition of financial performance, since the income statement is more likely than the balance sheet to offer information needed for making useful predictions.