Are Financial Reports Useful? The Views of New Zealand Public Versus Private Users

Abstract

This study reports on surveys conducted with users of financial reports in New Zealand. We compare findings for users of reports of two types of for‐profit entities, namely those with public accountability (public entities) and those with no public accountability (private entities). The findings indicate that both types of users have similar perceptions regarding the usefulness of financial statements, with the income statement and balance sheet rated as the most useful components. Furthermore, both types of users, especially private users, perceive financial statements as the most important information source for decision making. Public users have a greater interest in supplementary information than private users. The findings of this study contribute to the debate around differential reporting for private companies and have policy implications with regard to the user‐needs approach to accounting standard setting.

The usefulness of IFRS-compliant reports: perceptions of Sri Lankan investors and lenders

“…Arguably, the information needs are thus quite different. Prior studies (Barth et al, 2008;Cascino et al, 2014;Ehalaiye et al, 2018;Kothari et al, 2010) concur and provide empirical evidence on the varying information needs of investors and lenders. More specifically, information used and deemed useful can be significantly different for the two user groups, which has been shown when the groups have been analysed individually (Chenhall and Juchau, 1977;Epstein, 1975), comparatively (Benjamin and Stanga, 1977), and jointly (Abu-Nassar and Rutherford, 1996;Abdelkarim et al, 2009;Alattar and Al-Khater, 2008;Chatterjee et al, 2010;De Zoysa and Rudkin, 2010;Mirshekary and Saudagaran, 2005;Naser et al, 2003).…”

“…Concerning respondents' perception of different types of information, preparers considered annual reports as the most useful source of information, whereas users preferred the preliminary announcement made by companies They then identify different decision roles of user groups such as investment decisions for individual investors, teaching-and research-related purposes for academics, advisory statements for stockbrokers and granting and monitoring loans for loan officers. Third, we find comparative studies (Table 1, section C) between two specific groups in the domain of usefulness of financial reporting (Dawd et al, 2018;Ehalaiye et al, 2018;Stainbank and Peebles, 2006).…”

“…In our study, "use" refers to how frequently users refer to annual reports to make their decisions, and "usefulness" is used in the context of "able to be used for decision-making scenarios on investment or lending". Preparers identified the auditor's reports as the most important section of the annual report, while the Income statement and balance sheet were the most important for users Ehalaiye et al (2018) New Zealand Online survey (162) of users (advisors, investors, lenders and regulators) of public entities vs private entities Both user groups show a similar perception of the usefulness of financial statements. The income statement and balance sheet are the most useful components whereas, private users perceive financial statements as the most important against the public users have a greater interest in supplementary information as a source of information for decision making Table 1.…”

How the XRB Uses Research in Setting Accounting and Assurance Standards

“…The report (Laswad et al 2017) and XRB summary (XRB 2017c) were completed in December 2017. Combined information from these reports was published as Ehalaiye et al (2020).…”

Editorial

“…The remaining two papers are related to the theme of information usefulness. Ehalaiye et al (2020) report the findings of two studies undertaken for the New Zealand External Reporting Board on the perceived usefulness of financial reports. Users were asked about the usefulness of specific financial statements, supplementary reports and other information sources.…”