Reporting to Investors Summary

The purpose of this webpage has been to examine the problems implicit in providing investors with financial reports relevant to their needs. The difficulty in defining these needs by empirical research methods was revealed, and it was suggested that an alternative approach to this problem lay in formulating a normative theory of reporting to investors which could be based on the economics of decision making. A discussion of this suggestion revealed the importance of cash flows to investors, and the need to provide them with financial reports containing details of cash flows. Evidently, the most relevant information is that which is addressed to the future, and in this sense, the publication of cash flow forecasts would seem to meet investors' needs.

Various aspects of the problem of disclosing information to investors were considered, in particular the disclosure of company forecasts, segment reporting, and the disclosure of cost details and realizable values of assets.


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Read on: The Importance of Educating Users of Financial Reports

The importance of educating users of financial reports

From the foregoing discussion of the problem of defining users' needs as a pre-condition to developing a normative theory of financial reporting, it is clearly important that a successful resolution of this problem lies in part in educating users of financial reports. This need is urgent in two respects. First, sophisticated decision makers know the nature of the information which is required. This perception is necessary to the definition of the information input to the decision models used. Second, educated users of financial reports... see: The Importance of Educating Users of Financial Reports