New investor insights into financial reporting

By Michelle Crickett, ICAS Director of Research

9 March 2016

ICAS/EFRAG research highlights that the objective of investors does matter for the design of financial reporting standards.

A new international research study published by ICAS and EFRAG investigates professional investors views on and use of financial reporting information. This study is a follow on to the earlier ICAS/EFRAG Report The use of information by capital providers.

The independent research report by Stefano Cascino, Mark Clatworthy, Beatriz García Osma, Joachim Gassen, Shahed Imam and Thomas Jeanjean, Professional investors and the decision usefulness of financial reporting, has implications for standard setting in general and the current debate about the Conceptual Framework for Financial Reporting in particular.

Main findings

  • The objective of investors (valuation or stewardship) does matter.
  • Investors are strongly anchored on the income statement.
  • Investors have strong reservations about the representational faithfulness of bottom line figures.
  • Regardless of its shortcomings, financial accounting information is a key input factor for investors’ decision making.
  • The quality of corporate governance, including audit, influences investors’ assessment of the representational faithfulness.

Professional investors and the
decision usefulness of
financial reporting

View report

Implications of the research

  • One size does not fit all, suggesting that standard setters need to clearly prioritise the different objectives for financial reporting.
  • Investors seem to be strongly anchored on the income statement, which seem to conflict with the balance sheet view promoted by the IASB’s existing framework.
  • There is a need for development of more standardised performance measures for the income statement.
  • Investors’ perceptions of corporate governance significantly affect their views of representational faithfulness.  Standard setters therefore need to consider costs of corporate governance and enforcement of accounting standards when setting standards.  For preparers, investment in high quality governance, including audit, may well pay off in the form of enhanced investor confidence.

Anton Colella, ICAS CEO, said: “We are delighted to have worked with EFRAG and the team of researchers on this important global project.  The research demonstrates that stewardship can not necessarily be subsumed within an overall objective of ‘decision usefulness’ and whilst the role of stewardship has been strengthened in the current draft of the framework, ICAS believes that it should be given further prominence.”

Françoise Flores, EFRAG TEG Chairman, said: “User input is of critical importance to EFRAG’s activities. It provides further insights into what is relevant to investors and their advisors. The findings of the study helped EFRAG reaffirming that the income statement has a major role to play and that stewardship should be acknowledged as a distinct objective of financial reporting in its comment letter in response to the IASB’s Exposure Draft Conceptual Framework for Financial Reporting. EFRAG thanks the academic team for their thorough work and ICAS for the fruitful cooperation.”


  • Corporate and financial reporting
  • Research

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