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Toward More Functional Definitions of Relevance and Reliability Away from Abstract Economic Phenomena
Myojung Cho, Fordham University
Oliver Kim, University of Maryland
Steve Lim, Texas Christian University
ABSTRACT. In this paper we propose to redefine two primary qualities of useful accounting information, relevance and reliability. Oddly, the relevance of accounting information is currently interpreted as the relevance of the economic phenomenon chosen for the accounting standard. We propose that the relevance of accounting information be reinterpreted as the relevance of accounting information simply because accounting users are concerned about how closely accounting information, rather than unobservable phenomenon, is related to their decisions. Similarly, the reliability of accounting information is currently defined with respect to the chosen phenomenon. We propose that reliability be redefined with respect to the accounting standard because what is scrutinized in audits and litigations is whether or not accounting information closely follows the established accounting standard.
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