What Net Asset Value?- An Extension of a Familiar Debate.

Abstract The purpose of this article is to discover a theoretically sound model of asset valuation by reference to the basic underlying concept of financial position. It will be shown that several models of asset valuation can be developed from alternative assumptions or definitions of financial position, but that the application of certain metaphysical constraints brings about the rejection of some of these models. The article falls into two parts. Firstly, the financial position assumption and thus the asset valuation model considered theoretically sound and relevant to the environment of accounting will be developed. Secondly, the often-avoided realm of practice will be ventured into in order to subject the model to the constraint of objectivity. These two areas, while complementary to each other, would be seen as quite distinct parts of the development of theory and the application of that theory. It is seen that the need for objectivity in published reports is not a determinant of the theoretical model but rather a constraint on the application of theory. It is anticipated, then, that responses to this article will also be critical of the theoretical laying the model chosen and modification of that model under the constraint of objectivity.