Recent Developments of Statistical Approaches in Aspects of Accounting: a Review

Abstract

We review and simultaneously introduce a convenient statistical concept for the mathematical representation of the Statistical Activity Cost Theory (SACT) introduced by Willett (1987, 1988). Further, we discuss, and present a critique of a variety of statistical models with respect to long debated accounting problems, such as the allocation of joint costs and depreciation. We finally propose that taking the effort to combine those models results in a novel statistical accounting system and this is discussed by means of the so-called virtual firm. Our approach is methodological rather than empirical. We endeavour to demonstrate that the statistical models presented herein have a more natural interpretation and applicability than their deterministic analogues: hence, this review presents promising outcomes and useful perspectives for the accounting profession.

Interfirm differences in earnings variability: an analysis of fundamentals, cash flows and accruals

“…Earnings exist within a stochastic environment and accounting itself could be viewed as a ‘statistical’ discipline (Willett, ; Gibbons and Willett, ; Falta and Wolff, ). As the level (first moment) of earnings has been the focus of accounting for many years, few studies have focused on its volatility (second moment).…”

The impact of depreciation-type adjustments on the distribution of accounting earnings

“…The quantitative significance and policy implications of this property were investigated by Hillier and McCrae (1998). An application of SACT to the properties of the accountant's matching principle is contained in Su (2005) and a general review of statistical approaches to accounting, including recent developments in SACT, is presented in Falta and Wolff (2004). Most recently the theory has been applied to modelling asset maintenance costs in Royal Australian Navy vessels (e.g.…”

A Statistical Activity Cost Analysis of the Relationship Between Physical and Financial Aspects of Fixed Assets

“…In accounting, a rational framework which provides such an interpretation of costs is Statistical Activity Cost Analysis (SACA) due to Willett (1987Willett ( , 1988Willett ( , 1991 and extended by Gibbins & Willett (1997) and Falta & Wolff (2004). To date, applications of this framework to aspects of reliability theory, maintenance or life-cycle analysis have been limited (Falta, 2005).…”