Its contribution is to provide a theoretical framework for MBAR that integrates both
measurement and information perspectives for accounting information (i.e. it integrates the early normative approach with modern finance theory). The model is parsimonious, and does not incorporate information asymmetry—a key feature of many issues of interest to accounting researchers. Subsequent modelling has, however, enriched the basic model, thereby providing a role for many important features of the accounting system, such as conservatism, and different decompositions of earnings. A few UK researchers have made notable contributions to this modelling literature. Cooke and Tippett (2000) examine the
structure of the double entry bookkeeping system and demonstrate the conditions in which non-linear relationships exist between bookkeeping summary measures and the market value of equity. Ashton et al. (2003) also focus on non-linearities. Using a generalization of the linear information dynamics that underpins the Ohlson (1995) model, they present an aggregation theorem which shows that the recursion value of equity is functionally proportional to its adaptation value. Hence, the market value of equity (the sum of recursion value and adaptation value) will be a highly convex function of its adaptation value. Supporting UK evidence is presented. The implication of this is that empirical evidence based on the linear approach to residual income valuation is very difficult to interpret.