Uncertainty relation to earnings In our real life, the value of assets cannot be estimated perfectly because we cannot be certain for the future cash flows that the asset generates, and also we cannot...

Uncertainty relation to earnings

In our real life, the value of assets cannot be estimated perfectly because we cannot be certain for the future cash flows that the asset generates, and also we cannot be certain for the discount rate. Because of the uncertainty for the future cash flows and the discount rate, we cannot complete the balance sheet if we do have the income statement first. (a) Please discuss for how the uncertainty is related to earnings quality. (b) Can the uncertainty be reduced? How?