Designing financial statements by starting with desired results or by applying analysis for the benefit of the users

Two ways of approaching an issue in designing financial statements are (1) to start with desired financial statement results of possible solutions to the issue, or (2) to analyze the events and circumstances surrounding the issue and determine the ways to handle their financial effects based on the qualities that make financial statements best serve their users. Analysis should be used first. The results of using the solutions it derives should then be considered, and if they seem questionable then that should encourage a reexamination of the analysis and its underlying assumptions. (That is done throughout this book, for example, with the results of the temporal and current rate principles of translation; see Chapter 22.) If nothing else works, the issue should be reformulated or replaced by other issues: “If our present formulation of questions prohibits obtaining answers, we must reformulate those questions in order to obtain answers to them” (Sterling, 1979, 5).1