The Nature of Income measurements

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University Of Hertfordshire

De Havilland Business School

Module Title: Financial Reporting and Analysis

Module (course) Code: MBSP 00o5

Module Tutor: Jane Waksman

Academic Year: Semester B-2004

Financial Reporting and Analysis

Title: The Nature of Income measurements

Word count: 1,864

By ZhenZheng MAO

03058775

Hand in Date: 30th -Apr-2004

To discuss whether the financial statements are usefulness, the most important criteria are whether they can provide useful information to the users (Scott 2003). Theory and practice of financial reporting are typically centered on the notion of income measurement. However, Beaver and Demski (1979) argued that income measurement exists in a world of complete and perfect markets, but not necessarily otherwise. Thus, the financial statements will be little useful in the real world since they are more centered on the income measurement.

According to the FASB's conceptual framework, the primary purpose of financial statements is to provide information to some defined class of users, and financial statement must communicate useful information to the market, not just to existing investors in the firm. There is another important purpose of financial statements, which is future-oriented, is to provide the