Financial Reporting Problems : The Analysis of Quality of Disclosure and the Measurement System of the Traditional Accounting

Full disclosure has been regarded as one of the cornerstones of the accounting system to protect investors from "opportunistic behavior" of management. This principle is also put as the main principles of good corporate governance. Such idea has caused the dependency on full disclosure. However this paper reveals that the more the companies disclose information in financial statement, the more likely the companies will smooth their income. This paper argues that the main problem of the accounting is in the measurement system. Historical cost accounting should be abandoned. The single measurement such as cash equivalent unit proposed by Chambers can be used as alternatives. In this case, The International Financial Reporting Standard (IFRS) has been one step ahead in improving the quality of financial reports through the use of fair value valuation