Financial report information is highly relevant in many aspects of contemporary business life. Most users of financial statements are mainly investors and creditors. The principal concerns that users have in obtaining information are the reports’ usefulness for prediction, their appropriateness for comparison with reports from other companies, and their usefulness in evaluating for potential cash flows, their amount, timing, and the related uncertainty of occurrence (Ntanlianis, 1993). As such, there are several aspects that constrain the relevance and usefulness of financial reports.

First is the difficulty of understanding financial statements (Lev, 2018) particularly resulting from shifts in financial reporting methods, whether it occurs within the same country or from one country to another. Accounts designated by the same names may actually pertain to different elements with divergent qualities – i.e., some assets may be of higher quality than others, but appear under the same account. Second, even in jurisdictions where protection for investors is strong with high-quality financial reporting, and strong enforcement of regulations, the use of different accounting frameworks affects the associations between accounting information and market value. For instance, when shifting to the International Financial Reporting Standards (IFRS) from the Australian Generally Accepted Accounting Principles (AGAAP), the declaration of earnings more closely approaches market value, however, the book value of equity does not (Chalmers, Clinch & Godfrey, 2011). Also, under IFRS, there are increases in mean and median liabilities, decreases in mean and median equity, and earnings are understated more than overstated. The leverage ratio increases (Goodwin, Ahmed & Heaney, 2008).