Center for Excellence in Accounting and Security Analysis of Columbia Business School (CEASA)
Columbia Business School’s Center for Excellence in Accounting and Security Analysis (“CEASA”) aims to be a leading voice for independent, practical solutions for financial reporting and security analysis, promoting financial reporting that reflects economic reality and encourages investment practices that communicate sound valuations. CEASA’s mission is to develop workable solutions to issues in financial reporting and accounting policy; produce a core set of principles for equity analysis; collect and synthesize best thinking and best practices; disseminate ideas to regulators, analysts, investors, accountants and management; and promote sound research on relevant issues. CEASA's guiding criterion is to serve the public interest by supporting the integrity of financial reporting and the efficiency of capital markets. The Center is supported by General Electric, IBM and Morgan Stanley.
The paper considers that the business activity is the primary object of financial reporting, which is characterised as investing cash in non-cash resources to be combined according to a specific economic logic to generate future net cash flows. The production of net cash flows is the business activity in its entirety, not single non-cash resources or constructs like "net assets". The paper argues that different business activities have different business models based on a different economic logic and that the value of a non-cash resource to an activity depends on the way it contributes to the net cash inflows under the economic logic of the activity in progress, i.e. depending on its function and use. The paper claims that accounting concepts and measurement attributes have to be aligned with the inherent economic logic of an activity if faithful representation is to be achieved.