Whilst acknowledging the importance of high-quality corporate reporting, the recommendations to improve it are sometimes questioned on the basis that the marketplace for capital can determine the nature and quality of corporate reporting. It could be argued that additional accounting and disclosure standards would only distort a market mechanism that already works well and would add cost to the reporting mechanism, with no apparent benefit. It could be said that accounting standards create costly, inefficient, and unnecessary regulation. It could be argued that increased disclosure reduces risks and offers a degree of protection to users. However, increased disclosure has several costs to the preparer of financial statements.
Whilst acknowledging the importance of high-quality corporate reporting, the recommendations to improve it are sometimes questioned on the basis that the marketplace for capital can determine the nature and quality of corporate reporting. It could be argued that additional accounting and disclosure standards would only distort a market mechanism that already works well and would add cost to the reporting mechanism, with no apparent benefit. It could be said that accounting standards create costly, inefficient, and unnecessary regulation. It could be argued that increased disclosure reduces risks and offers a degree of protection to users. However, increased disclosure has several costs to the preparer of financial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:b. Discuss the relative costs to the preparer and benefits to the users of
financial statements of increased disclosure of information in financial
statements.
Transcribed Image Text:Whilst acknowledging the importance of high-quality corporate reporting, the
recommendations to improve it are sometimes questioned on the basis that the
marketplace for capital can determine the nature and quality of corporate reporting.
It could be argued that additional accounting and disclosure standards would only
distort a market mechanism that already works well and would add cost to the
reporting mechanism, with no apparent benefit. It could be said that accounting
standards create costly, inefficient, and unnecessary regulation. It could be argued
that increased disclosure reduces risks and offers a degree of protection to users.
However, increased disclosure has several costs to the preparer of financial
statements.
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