How FASB and the IASB Should Apply Hicksian Theory to Calculate Income

Both the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) inappropriately justify their “asset and liability view” of income determination based upon the published work of Nobel laureate economist J.R. Hicks. Hicks actually rejects the “asset and liability view” because the resulting income measurement includes windfalls. In this paper, Hicks' conception of income is expressed as a mathematical formula that yields an income estimate for individual assets and liabilities, ultimately to yield net income reflective of the “earnings power view” as espoused by Hicks and others.