Accounting Theory - Decision Usefullness Approach

The Decision Usefulness Approach
Accountants pee adopted a finding utility program approach to fiscal reporting as a reaction to the impossibility of preparing theoretically correct financial depositments.
The determination usefulness approach takes the view that if we firet falsify theoretically correct financial statements, at least we can try to make financial statements more useful.

Decision usefulness is contrasted with another view of the aim of financial reporting, namely stewardship, wherein the role is to report on managements success or lack thereof in managing the firms resources.

deuce major questions that must be addressed in adopting the purpose usefulness approach ar as follows:

1. Who are the users of financial statements?

There are many user groups, such as investors, lenders, managers and governments. These groups are called constituencies of accounting. Investors are the major constituency of users.

2. What are the decision problems of financial statement users?
In the face of difficult questions like these, accountants have turned to various theories in economics and finance, such as the theory of decision and the theory of investment.



By understanding these decision problems, accountants will be better prepared to meet the schooling needs of the various constituencies, and therefore financial statements will be more useful.

Single Person Decision Theory
Single psyche decision theory is a model of decision devising of an individual in the face of uncertainty. It enables us to appreciate the judgment of information, which enables decision-makers to update their subjective beliefs about future payoffs from their decisions. The theory recognizes that state probabilities are no longer objective as they are under ideal conditions and sets out a formal surgical process whereby the individual can make the best decision by selecting from a set of alternatives. This procedure allows additional info to be obtained to revise the...If you want to get a full essay, redact it on our website: Ordercustompaper.com



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