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....

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.


Extracted text: 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 Step 1 of 3 A country's financial 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, financial 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.