ACCOUNTING FOR STEWARDSHIP

What is meant by the objectives of an economic activity like financial reporting? One possibility is to define objectives as the reasons that the output of the activity is demanded.' Since financial statements are not usually thought of as consumption goods, asking for the reason they are in demand is not trivial. Two apparently different answers may be suggested to this question.2 (1) Financial statements may be of value to investors (in a broad sense) making investment decisions. I shall call this, decision-making demand. (2) Investors usually delegate decision making to managers. Then there may be a demand for information about the actions that are taken for the purpose of controlling them. This I shall call stewardship demand. Statement (1) is easily demonstrated as a proposition of information economics. The theory of decision-making demand for information is fairly well developed-at least for the case of a single decision makerand its implications for financial reporting have been extensively explored

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