Recognition: an Information Content Perspective

We review the historical and contemporary literature on the recognition issue. First, in a historical perspective, two debates stand out: historical cost as the basis for asset valuation and realization as the basic test for income determination. These debates are related to the recognition issue. Second, the economic foundations of the information content perspective are reviewed. The decision-making context (both single-person and strategic) receives much attention. Recent academic studies in accounting structure are also reviewed. It is concluded that a careful, economic inquiry into accounting recognition builds upon the research on value of information and on accounting structure. Helpful suggestions from my dissertation committee chairman Professor Joel Demski and from Professor John K. Simmons are gratefully acknowledged. Financial support is provided by the Arthur Andersen Foundation Doctoral Dissertation Fellowship program.