FINANCIAL REPORTING &
ANALYSIS
, QUALITY OF INFORMATION
Economic incentives influence the quality of
information supplied
Investment community, regulators, standard-
setters, and academics are all concerned
about:
Earningsmanagement affecting the quality of
reported financial statement numbers
Misleading and/or delayed voluntary disclosures
Analysts compromising their integrity due to the
lure of investment banking revenues
,ASSESSMENT OF QUALITY OF INFORMATION
Historical accounting numbers:
Contain information, but not very timely
Evidence of asymmetry, consistent with demand
for timely recognition of bad news
Evidence of earning management due to
implicit and explicit contractual incentives or
capital markets incentives
Voluntary disclosures:
Supplement financial statement information
Forward – looking and thus more timely
Some evidence of opportunistic disclosure
behaviour exist
, IFRS CONCEPTUAL FRAMEWORK
• The IASB has developed a conceptual
framework that provides a basis for preparing
and presenting financial statements
• Purpose is to provide a structure for creating
new accounting standards and to assist
preparers of financial statements when there
are no standards for guidance
We will look at:
▫ The objective of general purpose financial
reporting
▫ The qualitative characteristics of useful
financial reporting
4
ANALYSIS
, QUALITY OF INFORMATION
Economic incentives influence the quality of
information supplied
Investment community, regulators, standard-
setters, and academics are all concerned
about:
Earningsmanagement affecting the quality of
reported financial statement numbers
Misleading and/or delayed voluntary disclosures
Analysts compromising their integrity due to the
lure of investment banking revenues
,ASSESSMENT OF QUALITY OF INFORMATION
Historical accounting numbers:
Contain information, but not very timely
Evidence of asymmetry, consistent with demand
for timely recognition of bad news
Evidence of earning management due to
implicit and explicit contractual incentives or
capital markets incentives
Voluntary disclosures:
Supplement financial statement information
Forward – looking and thus more timely
Some evidence of opportunistic disclosure
behaviour exist
, IFRS CONCEPTUAL FRAMEWORK
• The IASB has developed a conceptual
framework that provides a basis for preparing
and presenting financial statements
• Purpose is to provide a structure for creating
new accounting standards and to assist
preparers of financial statements when there
are no standards for guidance
We will look at:
▫ The objective of general purpose financial
reporting
▫ The qualitative characteristics of useful
financial reporting
4
