Investors’ use of accounting information debated

By Michelle Crickett, ICAS

11 May 2015

Michelle Crickett, ICAS Director of Research, discusses the recent ICAS symposium at the European Accounting Association (EAA) Congress in Glasgow.

The use of accounting information by professional investors was recently debated during the ICAS symposium at the EAA Congress in Glasgow.

The symposium, chaired by Allister Wilson, EY Partner and Convener of the ICAS Research Committee, suggested that the current balance sheet focus adopted by the International Accounting Standards Board (IASB) may not be suited to the needs of financial statement users.

Professor Mark Clatworthy (University of Bristol) and Professor Joachim Gassen (Humboldt-Universität zu Berlin) presented the interim results from a large ICAS and European Financial Reporting Advisory Group (EFRAG) sponsored research study investigating the use of information by professional investors.   

The study revealed that income statements data is regarded as more relevant and faithfully represented than balance sheet items.  

Preliminary findings

  • Professional investors are strongly anchored on the income statement.
  • Income statement items are regarded as more faithfully represented than balance sheet items.
  • Accounting information is a key information source for professional investors.
  • The purpose for which the accounting information is being used, i.e. whether to value a firm or assess its management can influence its usefulness.
  • Earnings management is seen as prevalent but not as important to investors as might have been expected - reliance is placed on governance and audit procedures to keep it at bay.
  • One size does not fit all.

Panel session

Jim Pettigrew CA, ICAS President, Guy Jubb, Global Head of Governance and Stewardship at Standard Life Investments, and Peter Joos of INSEAD and formerly Morgan Stanley, joined the panel to give their response to the research findings and accompanied the researchers in answering questions from the floor. 

Jim Pettigrew, who has over 30 years' experience in the investment and corporate world, stated that it was a "fascinating study" that highlights the importance of the need to provide relevant, easily understood and timely financial data to the various users of this information. This is a fundamental tenet of efficient movement of capital in markets.


Pictured above: Guy Jubb, Jim Pettigrew, Allister Wilson, Peter Joos, Mark Clatworthy and Joachim Gassen.

Jim said that it was interesting to note the findings relating to the importance of the income statement which struck a chord with him around the practical difficulties he had experienced over the last 10 years or so explaining underlying profit /cash performance of businesses to the external investment community.

Guy Jubb commented on the links between the study and the IASB's development of the Conceptual Framework. He also questioned why the integrated reporting initiative has not gained more momentum. 

Peter Joos stated that financial analysts are not ignoring parts of the financial statements in their work, but that their focus in communication with clients is often geared towards components of the income statement. 

The panel debate and Q&A session also focussed on:

  • Earnings management
  • The importance of cash
  • The timeliness of financial reporting
  • Fair value accounting
  • Performance measurement
  • The  differences between faithful representation and reliability
  • The need to differentiate between types of investors
  • The fact that important information in the front half of the annual report, such as KPIs, is not audited

The session noted the importance of financial statements to professional investors (ranked in the top four of information used) – even if only in a confirmatory role.

The University of Strathclyde hosted the EAA Congress on 28 -30 April 2015 at the SECC Glasgow. The annual congress attracts over 1,200 accounting academics from around the world. 

ICAS was proud to sponsor this prestigious event as we are committed to maintaining and strengthening the links between academia and the profession, and supporting world-class research.

The ICAS and EFRAG sponsored research study is based on a large sample of face-to-face interviews of international professional investors and will inform the debate on the IASB Conceptual Framework. The research team comprises: Mark Clatworthy; Joachim Gassen; Stefano Cascino; Beatriz Garcia Osma; Shahed Imam; and Thomas Jeanjean.  This research project follows an extensive literature review - published by ICAS and EFRAG - by the same research team: The use of information by capital providers.  The new study will be published later in 2015.


  • Corporate and financial reporting
  • Research

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