Accounting Profits

Accounting Profits

The revenue a company derives from its operations, less all explicit costs. For example, if a company's revenue is $1 million and its total overhead is $750,000, its accounting profit is $250,000. Unlike economic profits, accounting profits do not consider an activity's opportunity cost.
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For this reason, strategies focused on reducing taxable income would result in lower accounting profits in environments with high levels of conformity.
Due to the reduction of consumption spending, the accounting profits of the consumption stage and the stages closest to consumption will fall.
Accounting profits of e1/495 mln were recorded on the transaction c.
Research shows that accounting profits provide little information about value creation--several empirical studies have revealed low correlations between accounting profits and value changes in an annual measurement window.
These include application of accounting profits and Ricardian rents to antitrust enforcement, resource distribution in a double lawsuit, the economics of contract interpretation, foreign exchange regulations and pharmaceutical sector research and development in India, the use of transaction cost economics for choosing between environmental regulatory instruments, and economic analysis of allegations in cigarette litigations and the impact of Federal Trade Commission regulation.
Ball and Brown's research findings indicate correlation between accounting profits and stock market reaction (stock prices).
The required rate of return at each stage of the production process explains the effect of transfer pricing inflating accounting profits and hiding economic profits.
This tradeoff, reporting lower accounting profits in exchange for paying lower taxes, is due to a tax regulation commonly referred to as the LIFO conformity rule.
For this reason, companies reporting under IFRS framework, by law, have to transform their accounting profits to such results which are in accordance with national accounting regulations.
As a requirement, it is not eliminated even when accounting profits are low or less than zero.
Many things affect accounting profits but not economic values, and vice versa: Accounting profit measures focus on the past, are transactions-oriented, highly dependent on the choice of measurement method, conservatively biased, Ignore some economic values and value changes that accountants feel cannot be measured accurately and objectively, ignore the cost of equity capital and ignore risk and changes in risk.

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