BU457 Study Guide - Midterm Guide: Decision Theory, Financial Statement, Efficient-Market Hypothesis
Document Summary
Key idea is that losses are recognized as they happen (losses from impairment, lower of cost and market value, ect. ) but gains are only recognized when they are realized (only when assent is sold ect) Idea is that rules are easy to circumvent and justify to the person whereas a concept that the financial statements must not be misleading can not be circumvented as easily. Not everyone will react to the same to information presented in the same format. Should reflect real underlying values of securities and managers. Be aware of impact of financial reporting has on investors decisions. Improves understanding on how reporting affects investor decisions. Creates theories to better predict the market"s behaviour. Understand managers interests and corp governance issues. Adverse selection: when one party in a transaction has an info advantage over the other. Conclusions on the measurement approach to decision usefulness.
