Mary Barth (2018, p.76) states: “Financial reporting, particularly profit or loss, is important, which creates incentives for firms and managers to manage it. Financial reporting requires judgement to implement, which creates opportunity. Combine incentives and opportunity and you get earnings management. The use of judgement in accounting creates scope for earnings management, yet the use of judgement is the only way financial reporting can convey information…The question is what to do about it, if anything?” Mary E. Barth, (2018) “The Future of Financial Reporting: Insights from Research”, ABACUS (A Journal of Accounting, Finance and Business Studies), Vol.54, No.1, 2018. 

Required: 

Critically discuss the claim that financial statements are not useful for decision-making and that accounting information is not credible and reliable due to the subjectivity in financial statements because of the application of judgements and assumptions.

Answer rating: 100% (QA)

Solution The claim that financial statement are not useful for decision making and that accounti... View the full answer