Title: Accounting Numbers and Managementâs Financial Reporting Incentives: Evidence from Positive Accounting Theory
Abstract:Accounting information plays a significant role in market-based economies because it is pivotal used by those who provide capital to help in making an informed economic decision. The public accepts th...Accounting information plays a significant role in market-based economies because it is pivotal used by those who provide capital to help in making an informed economic decision. The public accepts the accounting information as the gospel truth without considering the politics underneath in the preparation and presentation of the financial statement. Unsuspected investors rely on the accounting numbers as presented in the published/final account of an entity via financial reporting. The positive accounting theory hypotheses postulated that in the choice of accounting policies underlying the preparation of financial statement there are certain factors like bonus plan, debt covenant and political hypotheses that are put into consideration. Â Investors to rely on the accounting information must critically examine and understand the reason behind the accounting figures as presented in the financial statement by the directors who are the agents of the entity to be able to make an economic decision as to whether it is proper to invest in such an entity.Read More
Publication Year: 2017
Publication Date: 2017-01-01
Language: en
Type: article
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