Allocating resources in the most efficient manner maximizes the wealth of any country. It is generally acknowledged that financial information plays an important role in efficient resource allocation. Required: Given that both of the preceding statements are correct, why are the financial reporting rules in some countries (e.g., Canada and the United States) designed to be very helpful to external investors whereas in other countries (e.g., Germany and Japan) they are intended to be less helpful? Step-by-step solution Step1of3 A country’s finandial reporting philosophy evolves and reflects the specific legal,political and financial institutions within the country. External investors are the more important source of financial capital in Canada and the United States than they have historically been in Germany and Japan. Consequently, finandial accounting and reporting standards in Canada and the U.S. have evolved to meet this public financial market demand for information-what the chapter describes as the economic performance approach. Allocating resources in the most efficient manner maximizes the wealth of any country. It is generallyacknowledged that financial information plays an important role in efficient resource allocation.Required:Given that both of the preceding statements are correct, why are the financial reporting rules in somecountries (e.g., Canada and the United States) designed to be very helpful to external investorswhereas in other countries (e.g., Germany and Japan) they are intended to be less helpful?Step-by-step solutionStep 1 of 3A country's financial reporting philosophy evolves and reflects the specific legal,political and financialinstitutions within the country. External investors are the more important source of financial capital inCanada and the United States than they have historically been in Germany and Japan. Consequently,financial accounting and reporting standards in Canada and the U.S. have evolved to meet this publicfinancial market demand for information-what the chapter describes as the economic performanceapproach.

The financial reporting policy of a country shows the financial, political and legal institutions…

Answered: Allocating resources in the most…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA1: International Financial Reporting Standards

Section: Chapter Questions

Problem 6MCQ

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Allocating resources in the most efficient manner maximizes the wealth of any country. It is generally acknowledged that financial information plays an important role in efficient resource allocation. Required: Given that both of the preceding statements are correct, why are the financial reporting rules in some countries (e.g., Canada and the United States) designed to be very helpful to external investors whereas in other countries (e.g., Germany and Japan) they are intended to be less helpful? Step-by-step solution Step1of3 A country’s finandial reporting philosophy evolves and reflects the specific legal,political and financial institutions within the country. External investors are the more important source of financial capital in Canada and the United States than they have historically been in Germany and Japan. Consequently, finandial accounting and reporting standards in Canada and the U.S. have evolved to meet this public financial market demand for information-what the chapter describes as the economic performance approach.

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