Briefly explain the meaning of decision-usefulness in the context of financial reporting.
Decision usefulness is the approach adopted by the accountants while preparing the financial report with the objective of assisting the current and potential investors in making decisions regarding investments.
Financial reporting is the process of disclosing vital financial data to present the actual financial position and performance of the business. It is an important process carried out regularly by every business firm.
Decision-making is a vital process that every stakeholder must carry out to earn more revenue from the business. Financial reporting is a key player in the decision-making process as it provides relevant financial data needed to make important business decisions. This emphasizes the need to prepare financial reports most efficiently and honestly. So, the decision usefulness approach of financial reporting directs the accountant to make the right financial and accounting choices.
The chair of the FASB at one time noted that “the flow of standards can only be slowed if (1) producers focus less on quarterly earnings per share and tax benefits and more on quality products,and
(2) accountants and lawyers rely less on rules and law and more on professional judgement and conduct.” Explain his comment.
CA 1-4 (Financial Accounting) Omar Morena has recently completed his first year of studying accounting. His instructor for next semester has indicated that the primary focus will be the area of financial accounting.
Question: Economic consequences of accounting standard-setting means:
(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.
(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.
(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information
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