We connect conservative accounting to the cost of capital by developing an accounting model within an asset pricing framework. The model has three distinctive features: (1) transaction-cycle-conformity, where the book value equals the value of cash at the beginning and the end of a cash-to-cash...

We connect conservative accounting to the cost of capital by developing an accounting model within an asset pricing framework. The model has three distinctive features: (1) transaction-cycle-conformity, where the book value of an investment equals the value of cash at the beginning and the end...

We examine four key conceptual tensions that are at the heart of many financial reporting dilemmas: stocks vs. flows, ex-ante vs. ex post, conventions vs. economic substance, and top-down design vs. bottom-up evolution as sources of accounting practice. Associated with each of these conceptual...