Expected values in financial reporting

The FASB has stated that a primary objective of financial reporting is to provide information that is helpful in assessing the amounts, timing, and uncertainty of an enterprise's prospective net cash inflows. Many uncertain and multidimensional items appear in financial statements as single numbers. Decisions about recording those items rest on various estimates, assumptions, and judgments about the outcomes of events that have not yet occurred. In consequence, one cannot know whether the recorded items and numbers are correct until the events occur. The treatment that accounting gives uncertain and multidimensional items has resulted in what may be perceived as inconsistencies in practice. These inconsistencies will persist and worsen until accounting establishes coherent principles for uncertain and multidimensional amounts. The use of expected values may provide a useful way to deal with those problems.