A NEW LOOK AT FINANCIAL STATEMENT ARTICULATION: FINANCIAL ACCOUNTING AT THE CROSSROADS

Traditionally, earnings announcements are considered principal stock price drivers. Currently, earnings per share and price-earnings ratios are the primary benchmarks in investor decisions. The literature is reviewed in search of a definition of quality earnings. A model of financial statement articulation is developed that should help differentiate quality earnings from ordinary bottom-line earnings. The proposed model is applied to companies that have suffered recent financial disasters. Results of the study indicate that the financial statement articulation model proposed by the authors is beneficial in distinguishing quality earnings from ordinary bottom-line earnings. This study should provide impetus for the accounting profession to improve the earnings reporting process.