Choice Among Financial Reporting Alternatives.

Abstract The article reports that the question of selecting among financial reporting alternatives is viewed in the same manner as any other information choice problem. That is, one moves from the system, to the signal, to the actions induced by the signal, to the consequences that stem from the actions, to--ultimately--the evaluation of these consequences. Two difficulties, however, emerge. First, the consequences affect a number of individuals. As a result, developing a model of these consequences becomes a nontrivial task. This problem was approached by focusing on a general equilibrium setting and assumed that interequilibria movements would not only occur, but would occur without cost. Second, evaluation of consequences ultimately must entail trading off one person's gains for another's. One cannot collapse the evaluation, question into a generally usable, straightforward preference relation without imposing how these trade-offs are to be accomplished. This imposition may take the form of a direct and obvious imposition or selection of some institutional method of choice, such as reliance on information markets, voting, or social control agencies.