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The residual income model's theoretical development relies on the clean surplus relation, which states that all changes in book value are caused by either current
The residual income model's theoretical development relies on the "clean surplus relation," which states that all changes in book value are caused by either current earnings retained in the firm or dividends paid out. What transactions violate this relationship under U.S. GAAP? Should U.S. GAAP alter accounting standards to move closer to this clean surplus relationship? Why or why not
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