Recent research has studied the effect of different levels of mandated financial accounting disclosure on the behavior of the reporting firms. Of particular interest is whether the level of such disclosure increases the level of competition among the reporting firms, increases tacit collusion among them, or has no effect. These issues have been addressed using experimental markets. Much work has studied the effect of publicly available information on the behavior of the stock market. One of the important sources of such information is the accounting data generated by a stream of recent research assesses how accounting information is processed in the capital market securities.
Related research examines the capital income, cash flows, and accruals.
While investment decisions are based on cash flow forecasts their consequences are evaluated on the basis of current earnings, which include many non-cash adjustments like depreciation. Such non-cash items are often quite subjective and susceptible to corporate discretion. It seems both feasible and desirable to build an accounting system that excludes such non-cash items, and is capable of providing a profitability indicator that is useful for performance evaluation. In this research, new concepts and measurement techniques are developed in order to construct such a system. Momentum accounting generates a balance sheet that lists the revenue and expense momenta of an enterprise.