Based on extant literature, we review the positive theory of GAAP. The theory predicts that GAAP's principal focus is on control (performance measurement and stewardship) and that verifiability and conservatism are critical features of a GAAP shaped by market forces. We recognize the advantage...

This paper discusses the paper "Implications for GAAP from an Analysis of Positive Research in Accounting," by Kothari, Ramanna, and Skinner (in press). I discuss the role that information can play in efficiently allocating capital in the economy, and I argue that the GAAP is not primarily...