Information Economics and Its Implications for the Further Development of Accounting Theory.

Abstract The article presents information on information economics and its implications for further development of accounting theory. In 1966 the American Accounting Association (AAA) issued, "A Statement of Basic Accounting Theory," in which it said, essentially, accounting is an information system. More precisely, it is an application of a general theory of information to the problem of efficient economic operations. It is the purpose of this paper to take the AAA Statement seriously, and to examine whether useful developments might take place in accounting theory if one forced an interaction between it and the economic theory of information. The paper begin by setting out the assumptions that will be used throughout. Many people will find that they cannot accept some or all of the assumptions used in this paper, nevertheless it seems sensible to try for lucidity in setting forth the assumptions, since it permits the reader to have his reservations consciously evoked. Otherwise, there is the danger of ending up in arguments over conclusions that are in reality arguments over premises. After these preliminaries, the study turns to an exposition of the Information Economics model and the same framework is then adapted to an examination of the accounting model as a special case. This provides the opportunity to make some brief comments about accounting systems as seen from this new vantage point.