BU457 Chapter Notes - Chapter 3: Financial Statement, Decision Theory, Broad Group
Document Summary
Fat chapter 3 the decision usefulness approach to financial reporting: decision usefulness. P ( h ) p (gn h )+p ( l) p (gn l) The amounts to be received from a decision. Subjective probabilities incorporating all that is known about the. A table giving, conditional on each nature, the objective probability of. Information system each possible financial statement evidence item: main diagonal probabilities: left to right, top to bottom, off-main diagonal probabilities: right to left, bottom to up, noise. Weakening of the relationship between current financial statement information and future firm performance. A move to value-in-use in accounting will increase informativeness only if its greater relevance outweighs the decrease in reliability: supplementary current value information is one way to increase relevance without sacrificing reliability or vice versa. Gn or bn in current earnings on the market price of the firm"s shares. Information is evidence that has the potential to affect an individual"s decision.
