Understanding confirmatory value

In accounting, information has confirmatory value when it helps users to confirm or adjust prior expectations. But why is confirmatory value an important attribute for accounting information to have? The importance of confirmatory value People read accounting financial statements in order to create predictions about the future. They want to predict future dividends and that the company […]
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Relevance in accounting

Accounting information is relevant (“accounting relevance”) when it is capable of making a difference in a decision. Suppose that you’re trying to decide what to eat for dinner: A hamburger? Or a salad? What information is relevant to your decision? The price of each meal, perhaps. And consider the number of calories, too. Do you have […]
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When does accounting information have “predictive value?”

In accounting, information has predictive value when you can use it to form expectations about the future. Using the future to predict the past How should investors make decisions about loaning money to a company, or investing in its stock? High quality accounting information helps investors to make these decisions. When you think about it, investors really want […]
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