The stewardship role in financial reporting has been developed to ensure that a “firm’s invested capital is maintained in such a way as to preserve the economic interests of stockholders and bondholders”(Kothari, 2010). Furthermore, the role of stewardship is also used in the control of managers. As a result, according to accounting literature the stewardship role of accounting is considered to aid the efficiency of contracts that address agency conflicts between these managers and shareholders.
The valuation role is essential in financial accounting as it is the process of valuating business assets to provide predictions of future cash flows associated with the fundamental value of the firm and its securities (Cascino, 2016). The Valuation …show more content…
Stewardship helps investors to assess management because of information from obsolete operations on the primary statements shows the financial costs of the decisions that management make. By having the stewardship subsuming it under decision usefulness it meets the needs of investors of private entities and the stakeholders of not-for-profit entities. Both these types of businesses prepare financial statements and have a stewardship focus, due to their voters needing the information on how management is operating and whether to entrust continuing with them (EFRAG, 2007). By having two separate objectives this would risk the separating of company’s performance against the company’s managers, when many view these two as undividable. This could lead to an absence of importance on information relating the company’s performance, which is unacceptable (EFRAG, …show more content…
The core objective of financial reporting should be the aggregation and distribution of information that is applicable for creating decisions regarding investment, credit and resource allocation whereas stewardship is focuses on the responsibilities of management of the firm and the accountability of their decisions (Barnert, D, 2010). The downgrading of stewardship and the prominence to future cash flows shifted importance on potential investors and creditors at the expense of existing investors and creditors. This downgrade is to assist the short-term investors necessities and has disregarded the long-term investors (Cascino,
The valuation role is essential in financial accounting as it is the process of valuating business assets to provide predictions of future cash flows associated with the fundamental value of the firm and its securities (Cascino, 2016). The Valuation …show more content…
Stewardship helps investors to assess management because of information from obsolete operations on the primary statements shows the financial costs of the decisions that management make. By having the stewardship subsuming it under decision usefulness it meets the needs of investors of private entities and the stakeholders of not-for-profit entities. Both these types of businesses prepare financial statements and have a stewardship focus, due to their voters needing the information on how management is operating and whether to entrust continuing with them (EFRAG, 2007). By having two separate objectives this would risk the separating of company’s performance against the company’s managers, when many view these two as undividable. This could lead to an absence of importance on information relating the company’s performance, which is unacceptable (EFRAG, …show more content…
The core objective of financial reporting should be the aggregation and distribution of information that is applicable for creating decisions regarding investment, credit and resource allocation whereas stewardship is focuses on the responsibilities of management of the firm and the accountability of their decisions (Barnert, D, 2010). The downgrading of stewardship and the prominence to future cash flows shifted importance on potential investors and creditors at the expense of existing investors and creditors. This downgrade is to assist the short-term investors necessities and has disregarded the long-term investors (Cascino,