ABSTRACT
An assumption made in this chapter and, indeed, throughout this book, is that the choice of accounting procedure is important. Accounting reports are a commodity supplied by management to satisfy a demand for financial information from shareholders and other interested parties. The priorities of the producers and consumers of accounting reports do not, however, always coincide. For instance, management, when planning to raise further capital, aims to publish accounts which are a favourable advertisement of the company's achievements and potential. Investors, on the other hand, usually prefer objective data on which to base their decisions. If managerial bias is allowed to intrude, investors may well be misled and a suboptimal allocation of resources is likely to result.
