ASEAN Journal on Science and Technology for Development


The essence of earnings in financial statements is significantly influenced by changes in the economic environment. The main objective of this paper is to elucidate a universal principle capable of explaining any types of earnings measurements. To achieve this, we examine the factors influencing earnings by modeling them from a cash flow perspective. Consequently, this paper directs the attention away from stocks and flows, placing emphasis on the risks inherent in income and expenditure in the context of earnings measurements. It highlights the crucial role of these risks in earnings. Additionally, we illustrate that adjusting these risk tolerances enables the representation of any types of earnings measurements. Furthermore, it also mentions that traditional accounting basic concepts, including the principle of matching expenses with revenues, can be interpreted in the context of such risks. If these concepts that have been described in language can be organized through the concept of risks, it is expected to contribute to subsequent research.

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