Home > Research > Publications & Outputs > Analytical Properties of Earned Economic Income
View graph of relations

Analytical Properties of Earned Economic Income

Research output: Contribution to journalJournal articlepeer-review

Published

Standard

Analytical Properties of Earned Economic Income. / Peasnell, Ken.

In: British Accounting Review, Vol. 27, No. 1, 03.1995, p. 5-33.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Peasnell, K 1995, 'Analytical Properties of Earned Economic Income', British Accounting Review, vol. 27, no. 1, pp. 5-33. https://doi.org/10.1006/bare.1995.0002

APA

Vancouver

Author

Peasnell, Ken. / Analytical Properties of Earned Economic Income. In: British Accounting Review. 1995 ; Vol. 27, No. 1. pp. 5-33.

Bibtex

@article{c523b73cb42746dc80a4c95990282445,
title = "Analytical Properties of Earned Economic Income",
abstract = "This paper examines the theoretical properties of J. R. Grinyer{\textquoteright}s {\textquoteleft}earned economic income{\textquoteright} (EEI) model. Features examined include the connection between EEI and residual income; the proportionality relationship between EEI book values and cost allocations and their present value and deprival value counterparts; the extent to which EEI is affected by arbitrariness of allocations and difficulties of aggregation; and the possibilities which EEI presents for manipulation by informed insiders. The most important of the findings regarding the suitability of EEI for its declared purpose as a tool for evaluating managerial performance are summed up in two propositions. Proposition I states that EEI depreciation computed by reference to cost savings will have the properties required by Grinyer if and only if the ratio of cost savings to revenue is constant across all periods. Proposition II contends that EEI will yield a more reliable measure of performance than re-computed net present value if and only if the investment is believed to be worthwhile.",
author = "Ken Peasnell",
year = "1995",
month = mar,
doi = "10.1006/bare.1995.0002",
language = "English",
volume = "27",
pages = "5--33",
journal = "British Accounting Review",
issn = "0890-8389",
publisher = "Academic Press Inc.",
number = "1",

}

RIS

TY - JOUR

T1 - Analytical Properties of Earned Economic Income

AU - Peasnell, Ken

PY - 1995/3

Y1 - 1995/3

N2 - This paper examines the theoretical properties of J. R. Grinyer’s ‘earned economic income’ (EEI) model. Features examined include the connection between EEI and residual income; the proportionality relationship between EEI book values and cost allocations and their present value and deprival value counterparts; the extent to which EEI is affected by arbitrariness of allocations and difficulties of aggregation; and the possibilities which EEI presents for manipulation by informed insiders. The most important of the findings regarding the suitability of EEI for its declared purpose as a tool for evaluating managerial performance are summed up in two propositions. Proposition I states that EEI depreciation computed by reference to cost savings will have the properties required by Grinyer if and only if the ratio of cost savings to revenue is constant across all periods. Proposition II contends that EEI will yield a more reliable measure of performance than re-computed net present value if and only if the investment is believed to be worthwhile.

AB - This paper examines the theoretical properties of J. R. Grinyer’s ‘earned economic income’ (EEI) model. Features examined include the connection between EEI and residual income; the proportionality relationship between EEI book values and cost allocations and their present value and deprival value counterparts; the extent to which EEI is affected by arbitrariness of allocations and difficulties of aggregation; and the possibilities which EEI presents for manipulation by informed insiders. The most important of the findings regarding the suitability of EEI for its declared purpose as a tool for evaluating managerial performance are summed up in two propositions. Proposition I states that EEI depreciation computed by reference to cost savings will have the properties required by Grinyer if and only if the ratio of cost savings to revenue is constant across all periods. Proposition II contends that EEI will yield a more reliable measure of performance than re-computed net present value if and only if the investment is believed to be worthwhile.

U2 - 10.1006/bare.1995.0002

DO - 10.1006/bare.1995.0002

M3 - Journal article

VL - 27

SP - 5

EP - 33

JO - British Accounting Review

JF - British Accounting Review

SN - 0890-8389

IS - 1

ER -