Income measurement Concepts Economic comer Equals net cash flows the change in the present value of future cash flows Measures change in shareholder value--reflecting the financial effects of all events in a comprehensive manner Includes both recurring and nonrecurring components rendering it less useful for forecasting future earnings potential Related to Hicksian concept of income-income includes both realized(cash flow) and unrealized(holding gain or loss)componentsEconomic Income: • Equals net cash flows + the change in the present value of future cash flows • Measures change in shareholder value—reflecting the financial effects of all events in a comprehensive manner • Includes both recurring and nonrecurring components— rendering it less useful for forecasting future earnings potential • Related to Hicksian concept of income—income includes both realized (cash flow) and unrealized (holding gain or loss) components Income Measurement Concepts