Hello Jake,

Actually I was on record earlier in this thread as saying I was a believer in accrual accounting and that I thought it was about 75% accurate. I also said that was good enough for me. I think it is always appropriate to ask if our models are reflective of reality, don't you?

Regarding DCF and NPV, you asked me to take a position on an issue that you raised. I know that these things are inaccurate, and I do not hold them, or accrual accounting up to a standard of perfection. Show me where in this thread, or in anything that I have written where I held that accrual accounting would be 100% accurate, or even 90% accurate. At no point have I said that was the standard. However, when a group of people that subscribe to our Newsbrief poll find that the range is 50% to 75%, I think that means that there is room for improvement. Or do you find accrual accounting good enough, as is?

It seems to me as if you are staking this out as a research analyst vs. accountant debate, and am not sure what set you off in this polarized position. Also, I don't recall having agreed that this discussion was about DCF/NPV as perfect vs. accrual accounting. Those were the arms you took up. I am guessing that you expected that to be a valid point, but I don't defend those models as perfectly accurate either. Where did I indicate that?

The spirit of the question about accrual accounting is a valid one. And the results are what they are. There is no need to agree to disagree. What I agree with is that it is okay to ask about the accuracy of a model, any model, a DCF/NPV, a quant's algorithm, and certainly an accountant's accrual accounting, and any model. Are you saying that accounting is not big enough and safe enough in its quality to stand a little scrutiny? I am guessing that you feel that some scrutiny is warranted, as well as improvements along the way to reflect the ever-changing nature of business and business activity. It was in that spirit that the question was asked.

Yours, in service,

Jason