ACCT 7021 Chapter : Chapter 3 Summary
Document Summary
3. 1- a well-defined concept of net income does not exist in the complex real world, due to the inability to value an entire firm on a present value or market value basis. The consensus that financial statements should be useful leads to the concept of decision usefulness. To understand this concept, we must also understand the definition of usefulness and information. Chapter 3 is meant to introduce us to some theories regarding decision usefulness and discuss their relevance. 3. 2- decision usefulness contrasts with stewardship, which is the idea that financial reports should report on management"s success. Constituencies of accounting are the broad groups that use financial statements. These are groups of investors, managers, unions, standard setters, and governments. Tailoring financial statement information to the specific needs of the users of those statements will lead to improved decision-making. In order to determine the specific needs, accountants have turned to various economic and financial theories for assistance.
