+1 862 207 3288 accounting professor
Baruch Lev, a well-respected accounting professor at New York University’s Stern School of Business, has commented about the lack of relevance in today’s financial statements. He notes that the 500 largest companies in the United States have market-to-book ratios (the ratio between the market value of the company and its balance sheet value [total assets total liabilities]) that, on average, are greater than six. What this means is that the balance sheet reflects only 10 to 15 percent of the value of these companies. He claims that intangibles are fast becoming substitutes for physical assets. PR Newswire reported: “The traditional standards of financial accounting—measuring a company’s book value based solely on physical assets that appear on the balance sheet—is becoming obsolete.”
REQUIRED:
What is Professor Lev referring to when he mentions intangibles? Explain the reasoning underlying his claim. Do you agree with him? Why or why not?
accounting professor
