Accounting And Decision Usefulness

First, accounting and decision-making usefulness, accounting as an information system, its ultimate goal is to meet the needs of different information users, and decision-making usefulness is often regarded as the ultimate requirement of information users.

The structure of compiling and reporting financial statements promulgated by the international accounting standards board (IASC) states that when information can help users evaluate past, present and future matters, as well as confirm and change their past evaluations to affect users' economic decisions, information has decision-making usefulness, that is, relevance.

The usefulness of decision-making involves two aspects: first, whether the information users are concerned about the contents of accounting information; two, the timeliness, the predictive value and the feedback value of information.

The usefulness of decision making is the precondition of accounting existence.

Accounting is to identify, measure and record economic activities, report to the users of accounting information regularly, and provide financial services for investors, creditors and other users.

The decision-making role of accounting is everywhere.

If accounting can not provide users with useful information for decision-making, there is no necessity and possibility.

In the history of accounting development, Chad Field pointed out that the development of accounting is reactive.

Throughout the development history of accounting, the motive force of accounting development comes from two aspects: one is the change of social and economic environment; the two is the change of information demand of accounting information users.

Accounting is developing step by step in response to the two.

Among them, the former is the initiative, which determines the quantity and quality of accounting information needs.

Changes in the social and economic environment (gradually mature securities market, capital highly circulated, derivative financial instruments), accounting information users also greatly changed the demand for information, accounting is constantly challenged, and will make major changes.

For example, in recent years, the continuous development and application of new and high technology has turned into productivity, making human resources as a production factor more and more attention and attention. In order to meet the needs of people's information on human resources, accounting human resources accounting has emerged as the times require.

The usefulness of decision making has a huge impact on accounting.

With the continuous improvement of China's capital market, thousands of investors gather capital to form a large company, which is the trend of economic development.

Due to the separation of ownership and management rights, a large number of shareholders must rely on accounting information (mainly financial reports) as the basis for investment decisions.

The highest quality of accounting information is the usefulness of decision making. If the decision is not helpful, it is not worth the information.

Decision usefulness not only takes into account the needs of existing investors, but also takes into account the needs of potential investors, which requires accountants to face the future and provide more information related to decision-making, including financial information, quantitative and deterministic information, including non-financial information, qualitative and non deterministic information.

In 1987, when the United States began replacing the statement of changes in financial position with the cash flow statement, China also stopped preparing the statement of changes in financial position in 1998 and changed it to the statement of cash flows.

Why is the US Financial Accounting Committee determined to abolish the 17 year old history table which is widely accepted by the international accounting profession and replace it with the cash flow statement and cause many countries including China to follow it?

The reason is that users of accounting information pay more attention to cash flow information and pay more attention to decision-making usefulness.

This is not reflected in the statement of changes in the financial position.

Two, the limitations of traditional accounting on the usefulness of decision making should be recognized that traditional accounting models, especially the items to be explained and information disclosed in the accounting statements, have a certain effect on users' decision making, although their usefulness is different.

However, the traditional accounting mode has always been flawed, but it has not been revealed in the industrial economy era.

With the advent of knowledge economy and information age, the usefulness of accounting information has been constantly questioned, and the disadvantages of traditional accounting models are becoming more and more obvious.

1. traditional accounting can not reflect the true value of high-tech enterprises or information industries, so that the usefulness of accounting information can be reduced. The traditional accounting adopts the single measurement attribute and the historical cost principle as the basis of accounting measurement. Knowledge resources in high-tech enterprises become the driving force for the development of enterprises and the future value of enterprises. The historical cost reflects the financial situation of enterprises in the past.

Although historical cost accounting information also has certain prediction ability, decision making usefulness is not only a simple way to infer future events from the past, but to really make useful decisions, timely information and future information with reasonable prediction ability are essential.

This requires the adoption of fair value measurement attributes.

In addition, intangible assets such as intellectual property and human resources are becoming more and more important in high-tech enterprises and information industries. However, traditional accounting has not properly recognized and measured the main intangible assets. If some intangible assets are expended, in such circumstances, the size and profit level of enterprise assets will be very limited in decision-making.

2., the accounting method choice is limited. In accounting, there may be different alternative accounting methods for the same economic business.

In traditional accounting, the choice of accounting methods is based on two factors: (1) the usefulness of accounting information making decision; (2) simplicity.

Some accounting methods which can make accounting information more useful and more scientific have to be abandoned due to the difficulty of operation, such as the real interest rate method of amortization of bond investment, the age analysis method extracted from bad debt reserve, and so on, thus affecting the usefulness of accounting information decision making.

In order to better meet the needs of decision-making, simplicity should not be the basis for the choice of accounting methods. The only condition for the choice of accounting methods should be decision-making usefulness.

3., the timeliness of accounting information is poor, and it can only provide general accounting information, and provide timely, accurate and complete accounting information, so as to make corresponding business decisions is the duty of accounting.

Any outdated information is useless for decision making.

With the rapid development of modern science and technology, the product cycle is shortened, the technology is constantly innovating, the uncertain factors that affect the production and business activities of enterprises are increasing, and the original competitive advantage of enterprises may soon be lost. Under this environment, the information users' requirements for the relevance of accounting information are getting higher and higher, and the status of accounting information as an important part of relevance is more prominent.

However, in traditional accounting, regular accounting reports are used to output accounting information. The regular differences between reports and users' decision-making behavior make people feel that the information supply is not timely. In addition, statements are compiled after the end of an accounting period. Therefore, both dynamic reports and static reports have defects in the face of history, and the timeliness is rather poor, which increases the decision-making risk of information users to a certain extent.

The traditional accounting provides a general financial report to the users of accounting information as a whole.

This general financial report provides highly integrated information in a fixed form, neglects the difference of users' needs, and can not satisfy different users and users' decision-making needs at different times, and information users can only passively accept the general reporting mode provided by enterprises.

Three, decision usefulness is the soul of the existence and development of future accounting. With the rapid development of society and economy, the needs of information users are getting more and more attention. The usefulness of decision making to provide relevant information that helps users to make decisions becomes the leading direction of future accounting.

At the same time, the rapid development of information technology also provides technical conditions for future accounting to improve decision-making usefulness.

1., accounting information will meet the needs of users with the characteristics of adequacy and real-time. In a knowledge-based economy environment, knowledge will be commercialized and products become more and more innovative when the ability of innovation becomes capital. Therefore, it is possible for enterprises to identify and correctly measure their intangible assets. In the future, accounting will show the pattern of tangible assets and intangible assets fully revealed at the same time, and truly reflect the overall value of enterprises.

In order to meet the diverse needs of information users, future accounting will expand the amount of information, provide financial and non-financial information, static and dynamic information, quantity and quality information, material type and spiritual type information, forward-looking information, etc.

Through the Internet, the future accounting will establish a "real-time accounting system", which can record, process and report real time pactions in real time, and make daily information disclosure possible. It also provides a "Pyramid" reporting structure, from the bottom of the raw data to the high-level concentration information, which includes both general information and private information. Information users can directly enter the enterprise information system, communicate with the information providers, and choose the accounting information independently, so as to meet their decision-making needs, and do not have to wait until the phased reports are released to get those comprehensive historical information.

2., introducing multiple measures in the accounting system, so that the relevance and reliability of accounting information can be unified. Relevance and reliability are the two important criteria for measuring the quality of accounting information.

In a rapidly changing economic environment, the reliability and uncertainty of information often contradict each other.

But we should not oppose relativity and reliability.

If the information provided is true and reliable, but it is useless for people's decision making, that is, there is absolutely no correlation. People will certainly not waste human, material and financial resources to get such information.

Nowadays, the accounting profession in foreign countries emphasizes the relevance of accounting. Some even argue that even if it is not reliable enough, it can be reported as long as the relevant information is available. This view is biased.

If unreliable information is provided, it may be misleading to users' decisions, and the correlation can not be guaranteed.

The fundamental reason for this contradiction is that traditional accounting adopts a single measurement attribute.

If a single measurement attribute is converted to multiple measurement attributes and provides multiple information, the contradiction between relevance and reliability will be solved.

Generally speaking, the accounting information based on historical cost is more reliable, while the accounting information based on fair value is more relevant. If two kinds of accounting information of different measurement attributes are provided at the same time, it can not only meet the relevance, but also meet the reliability.

If the historical cost can not solve the measurement of the value of the innovative assets in the knowledge economy, we should introduce fair value as the measurement attribute in order to reflect the actual value of the innovative assets and disclose it in the form of financial statements.

The relevance and reliability of accounting information have been unified, forming an important factor for accounting profession to exist, and also a necessity for future accounting development.

3., supplemented by cash flow information, accounting information is more closely related to the traditional accounting system characterized by accrual basis. After decades of development, it still plays an irreplaceable role.

According to the regression test of American Accounting scientist Di Qian (Dechow), the importance of earnings information based on accrual basis in the capital market exceeds the cash flow information.

However, the earnings information based on accrual basis is easy to manipulate by the management authorities. Some enterprises with considerable profits may have financial difficulties and bankruptcy liquidation in a short time.

Therefore, cash flow information should be supplemented, because the past cash flow information is more conducive to predict the future cash flow than the profit information. Compared with the information provided by the balance sheet and profit statement, it has greater predictive value and feedback value, and can better adapt to the accounting oriented decision-making and future oriented development trend.

In addition, in the growing network economy, electronic cash will be widely used and cash flow will be greatly accelerated. Cash flow information is more relevant to decision making.

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