Asset Valuation with Imperfect Markets

References

• For two oft-quoted examples see , Edwards , E. O. and Bell , P. W. 1967 . The Theory and Measurement of Business Income , University of California Press . Chapter II and American Accounting Association Committee on Accounting Standards, ‘Accounting and Reporting Standards for Corporate Financial Statements, 1957, Revision’, The Accounting Review, (Oct. 1957), especially p. 538.
   Google Scholar
• Revsine , L. 1973 . Replacement Cost Accounting , Prentice-Hall . Chapter 4 for a detailed exposition of the arguments summarised in this section of the article.
   Google Scholar
• Corbin , Donald A. Oct. 1962 . “ The Revolution in Accounting ” . In The Accounting Review 630 Probably the most well known statement of this view is that of
   Google Scholar
• Revsine , L. and Edey , H. C. 1974 . “ Deprival Value and Financial Accounting ” . In Debits, Credits, Finance and Profits , Edited by: Edey , H. C. and Yamey , B. S. 77 Sweet and Maxwell .
   Google Scholar
• A list of these assumptions usually contains, at least, the following (i) each individual's activities in the market are of a scale not sufficient to affect the market price. (ii) there exist no artificial constraints on demand, supply or prices and there are no transaction costs or taxes. (iii) freedom of entry and exit into all industries exists for all individuals and resources are perfectly and instantaneously mobile and adaptable. (iv) all actors have identical expectations as to the returns from capital assets and are equally aware of all opportunities currently available in the market. For a discussion of these assumptions see, e.g.
   Google Scholar
• Cohen , K. J. and Cyert , R. M. 1965 . Theory of the Firm: Resource Allocation in a Market Economy , 49 – 51 . Prentice-Hall .
   Google Scholar
• Such a demonstration could follow that used by L. Revsine to establish the equivalence of the PV and RC income models in these conditions: see L. Revsine op. cit. pp. 95–100.
   Google Scholar
• K. J. Cohen and R. M. Cyert, op. cit. pp. 124–125 and 138–142.
   Google Scholar
• Barton , A. D. Oct. 1974 . Expectations and Achievements in Income Theory . The Accounting Review , : 670
   Google Scholar
• Snaveley , H. J. 1969 . Current Cost for Long-Lived Assets, A Critical View . The Accounting Review , April : 344 – 353 .
   Web of Science ®Google Scholar
• A. D. Barton, op. cit. p. 671.
   Google Scholar
• Bedford , Norton M. and McKeown , James C. 1972 . Comparative Analysis of Net Realisable Value and Replacement Costing . The Accounting Review , April : 333 The article uses their definitions of the RC and NRV of an asset. RC values are given by answering the question ‘what would be the cost today of purchasing assets, having services equivalent to those now held and expected to be used in the least costly form in the markets in which the entity normally trades?’ (p. 334). The NRV of an asset is defined as ‘the maximum net amount which can be realised from the disposal of that asset within a short period (not a forced sale situation)’ (p. 333).
   Google Scholar
• Bedford and McKeown, ibid. p. 334.
   Google Scholar
• Only firms using optimal technology will exist in long run equilibrium with perfect markets. However, P. Sylos- Labini has presented a plausible case that several technologies may exist in parallel over a long period in oligopolistic industries, see Oligopoly and Technical Progress (translated by E. Henderson), Harvard University Press, 1962.
   Google Scholar
• Penman , S. H. 1970 . What Net Asset Value—An Extension of a Familiar Debate . The Accounting Review , April : 345
   Google Scholar
• Baxter , W. T. 1970 . Sweet and Maxwell . Depreciation , : 32
   Google Scholar
• For a more detailed analysis of this topic in the long-run see the later sections of this article.
   Google Scholar
• H. C. Edey, op. cit. pp. 79–80.
   Google Scholar
• 1970 . Industrial Market Structure and Economic Performance , Rand McNally . For a detailed discussion of market structures and their effects on economic behaviour see F. M. Scherer or a detailed discussion of market structures and their effects on economic behaviour see F. M. Schere
   Google Scholar
• H. C. Edey, op. cit. p. 78.
   Google Scholar
• S. H. Penman, op. cit. especially pp. 338–343.
   Google Scholar
• Amey , L. R. 1969 . The Efficiency of Business Enterprise , 78 George Allen and Unwin . It is only fair to say that his conclusion is later qualified in a variety of ways.
   Google Scholar
• 1973 . Asset Valuation before and after Liquidation . Accounting and Business Research , Winter : 33 – 43 . Much empirical work is required to test this and other hypotheses concerning the effect of imperfect information and poor quality markets on the utility of the RC and NRV asset pricing models. Some recent work is reported in D. A. R. Forrester, and C. R. Beidleman, ‘Determinants of Second-Hand Asset Values’. Accounting and Business Research, No. 14 (Spring 1974), pp. 102–115. Both articles give further references.
   Google Scholar