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The Decision Usefulness Approach To Financial Reporting
The Decision Usefulness Approach To Financial Reporting
3-1
Copyright © 2009 by Pearson Education Canada
Chapter 3
The Decision Usefulness Approach to Financial Reporting
3-2
Copyright © 2009 by Pearson Education Canada
3.2 The Decision Usefulness
Approach
• It is the investor’s responsibility to make
investment decisions
• Role of financial reporting is to supply
information that is useful for this purpose
• To prepare useful information, the accountant
must know how investors make decisions
» Continued
H P(GH/H) P(BN/H) 1
State of
Nature
L P(GN/L) P(BN/L) 1
• Points to note:
– The rational investor
– Risk aversion
– Portfolio diversification
– beta
» Continued