Value relevance research suggests which measurement model best links share price and accounting information?

Question

Quizplus · Accepted Answer

Fair value accounting is regarded as the best measurement model for linking share price and accounting information as it provides the most relevant and timely information to investors. Fair value accounting reflects the market value of assets and liabilities, which is essential for making investment decisions. On the other hand, historical cost accounting and cash accounting do not reflect the current market values and can lead to distorted information for investors. Accrual accounting is a useful tool, but it may not provide timely information for investors, and in certain cases, it may require management judgments that could affect the quality and comparability of financial statements.

Value Relevance Research Suggests Which Measurement Model Best Links Share