Accounting Income vs Economic Income

The present research considers there might be two reasons for this phenomenon. From a macroperspective, as shown in Figure 2, after 2005, the number of citations of Scopus research in the usefulness of earnings field has generally shown a downward trend. The research on aggregate earnings is one of the research lines on the earnings usefulness, which leads to unified results. Secondly, according to the comparative analysis of the terms in Figure 4, Scopus research is more independent than WoS research.

• We believe that Scopus research studies have more development potential, and the development of new research directions can provide more support for the field innovation and development.
• However, according to the two databases’ outputs, their hotspot co-occurrence terms are not the same, and there are some different terms in each research line.
• The financial statement that reports revenues and expenses is called the A) Statement of retained earnings.
• More recently, Shahchera & Noorbakhsh believed that the research on risk and earnings should also consider the company size and type.
• We also document a surprisingly comparable decline in the usefulness of operating cash flows.
• Second, it introduces new economic factor proxies that confirm prior findings with respect to competition but differ from prior findings with respect to cost structure and growth opportunities.

In this https://intuit-payroll.org/, to better study the clustering of terms, it also uses binary counts to generate maps. For the term co-occurrence threshold, called critical value, which refers to the lowest or highest value that an effect can produce, because of the limitation of the number of terms, this research modifies it to 5. Similarly, VOSviewer, in order to ensure the results are meaningful, only keeps the most important top 60% of terms, so we only get 32 terms to generate maps. We use the same settings for Scopus data, and in 180 terms, we get 73 meets.

Some economic determinants of the time series properties of earnings

After manually excluding the completely unrelated fields, 251 publications were obtained on WoS and 282 on Scopus. We will first implement a bibliometric analysis of the earnings usefulness research. This step is to find the position of aggregate earning research in the current academic world and explore its macro development trend. We used the data we have collected to compare the annual publications . The present research will draw on the model of Liang et al. to predict the future research direction of aggregate earnings.

We also find that managers tend to exclude more expenses from non-GAAP earnings when it is costlier to use accrual earnings management due to balance sheet constraints, indicating that these tools are substitutes. Lastly, we find that investors discount positive earnings surprises when accompanied by exclusions from GAAP earnings, suggesting that the market partially understands the opportunistic nature of these exclusions.

Accounting earnings and future economic rents: An empirical analysis

Readers interested in estimating the opportunity cost of investment capital are encouraged to consult a general text in financial analysis, such as Brigham and Ehrhardt . W. Kang, “The asymmetric responses of aggregate earnings and stock returns to oil shocks and policy uncertainty,” Asia-Pacific Journal of Accounting & Economics, vol. Because the documents included in the two databases are different, we can see in Figure 2 that the two databases have significant differences. In WoS, the number of citations shows a steady upward trend from beginning to end, while in Scopus,it was very active from 1995 to 2006, and then, it shows a steep decline. Moreover, the number of influential papers is less than that in WoS. We believe that Scopus research studies have more development potential, and the development of new research directions can provide more support for the field innovation and development.

Overall, Accounting Income And Economic Income research developed better than WoS research in aggregate earnings research. Furthermore, in future development, it will have more potential, while WoS research in this field will gradually lose attention. At the same time, there is scarce research related to government and country macroeconomic policies. For the analysis and forecasting of GDP, there is a lack of research from an accounting perspective. Therefore, the present research contributes to narrowing this gap. The bibliometric analysis of the related research on aggregate earnings explores the relationship between the accounting income of microenterprises and the country macro-GDP.

An income strategy approach to the positive theory of accounting standard setting/choice

It turns out that the research on aggregate earnings related to economic growth has become a research hotspot in recent years. Scopus research and development potential is better than Web of Science in this field. Recently, there has been significant interest in the information content of aggregate accounting profitability. I collect evidence on whether aggregate profitability captures information about changes in the cost of capital as predicted by classical investment theory. Consistent with these predictions, I find that the stock market return is negatively related to future accounting profitability for several years into the future.

• As such, accounting profit represents a company’s true profitability while economic profit is indicative of its efficiency.
• Under current cost accounting, the reported income equals economic income in a perfectly competitive market system.
• Overall, Scopus research developed better than WoS research in aggregate earnings research.
• The step-by-step plan to manage your company before you prepare your financial statements.
• On the other hand, the economist would not find the accounting model relevant as a guide to prudent personal conduct.

When accountants confront uncertainty in regard to method or procedure, they conventionally choose the option that is least likely to overstate income or asset value. In the case of realized versus unrealized gains and losses, it is more conservative to exclude increases or decreases in value that have not yet been actualized.

An empirical evaluation of accounting income numbers

For example, in the case of accounts receivables, revenue is recognized immediately, but cash is not received until later. Economic profit is the difference between the revenue received from the sale of an output and the costs of all inputs, including opportunity costs. Accounting Income refers to the net gain earned by a company after all the expenses incurred for earning such profit. The gross income is income before deducting the expenses from total revenue. Accounting profit can be referred to as the revenue obtained post-meeting all economic costs, and Economic profit is obtained when revenue exceeds the opportunity cost.

Both database studies focus on the country, accounting, and conservatism. These terms show that this research line is about the relationship between the micro- and macrolevels, such as Shivakumar , Konchitchki & Patatoukas , and Sumiyana et al. . However, there are no more small research branches in WoS, and Scopus also mentioned other research directions such as importance and aggregate earnings management such as Gallo et al. and Ball et al. . This article already discovered that aggregate earnings research belongs to the first research line of earnings usefulness research (see section 3.1). After manually eliminating irrelevant fields, we obtained 74 publications on WoS and 94 publications on Scopus. This research will discuss its research status and future development trends in the two databases in this section.