Preparers’ perceptions of the decision usefulness of FRS15

Abstract

The objectives of financial reporting encompass a decision usefulness role for accounting information. Information is decision useful when it assists users to make decisions about investing in or doing business with an entity. Decision usefulness is therefore an essential part of the framework within which financial reporting standards are developed. The aim of this research is to assess the decision usefulness of the recently promulgated Financial Reporting Standard 15 (FRS15). To this purpose a random sample of 48 Chartered Accountants and Financial Controllers completed a self‐administered survey regarding various aspects of FRS15 and other factors related to the concept of decision usefulness. Statistical analysis of the responses indicates that respondents agree that overall FRS15 has a positive impact on providing decision useful information. There is strong support for the balance sheet approach on which the standard is based but respondents consider taht the matching approach also provides decision useful information, particularly in respect of allowing the recognition of provisions that do not meet the definition of a liability. The research also considers what respopndents intend to do with current provisions and future provisions following the implementation of FRS15. Although the respondents support consistency, they indicate that, in the case of contingencies, prudence should override consistency. The findings provide an important contribution to the knowledge pertaining to provisions and contingencies.