One purpose of an accounting system, or any information system, is to provide a set of signals designed to communicate descriptions of certain past phenomena believed to be decision relevant in the future.' However, it is difficult to evaluate a given or proposed information system because of its complexity. This complexity arises in part because of the interrelated problems of which phenomena to describe and how best to describe them. Since complexity hinders information system evaluation, decomposition of the total interrelated system into a number of less complex subsystems for evaluation purposes is often desirable. Unfortunately, most decomposition will introduce errors into the analysis. But if we can predict the resultant errors, decomposition can still provide a useful surrogate evaluation method. The purpose of this paper is to explore the decomposition approach to information system evaluation, at the conceptual level, relying heavily on Feltham's recently proposed model for predicting the value of information in the single decision case.2

Probabilistic depreciation is a method of determining the proper depreciation charge in each year of an asset's service life, when the service life is a random variable with known distribution. The paper discusses how the service life distribution is modified as more information is obtained about the actual lifetime of the asset. The problem of determining the proper amount to be charged each year to depreciation while at the same time maintaining the proper balance in the accumulated depreciation account is considered. The analysis is done both for a single asset case and for group depreciation. A final section discusses the use of Bayesian analysis for estimating the particular form of the service life distribution while the assets are in service.

J. Rose, W. Beaver, S. Becker, G. Sorter, Toward an Empirical Measure of Materiality, Journal of Accounting Research, Vol. 8, Empirical Research in Accounting: Selected Studies 1970 (1970), pp. 138-148