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Comment: Insights on How Decision Context Influences Investor Use of Financial Statements

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The European Financial Reporting Advisory Group
(EFRAG), in collaboration with the Institute of
Chartered Accountants of Scotland (ICAS), has
recently issued a report containing some thought-
provoking insights on how the context of an
investor’s decision – i.e. valuation versus
management stewardship assessment – influences
the priority assigned to and use of financial
statements. The conclusions of the study are based
on inferences made from a sample of 81
institutional investors and analysts reviewing a
hypothetical European manufacturing firm’s
financial statements. The results show that the
context of an investor’s decision influences the
relative importance which investors attach to the
primary financial statements (income statement and
balance sheet) and to the line items within these
statements.

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Decision Context Influences
Investor Use of Financial Statements