Testing the Information Set Perspective of UK "Financial Reporting Standard No.3: Reporting Financial Performance"

This study investigates whether a broader range of financial performance measures as required by "FRS No.3" ("FRS3") provides incremental price information beyond a single earnings-based performance measure. I find that the additional performance components reported in the layered statement of performance and reconciliation of movements in shareholders' funds and alternative earnings per share that are voluntarily disclosed by UK firms are generally associated with share returns, and provide incremental price information beyond "FRS3" all-inclusive earnings. This finding supports the information set perspective underlying "FRS3", and has important implications for setting a global accounting standard on reporting financial performance. Copyright 2006 The Author Journal compilation (c) 2006 Blackwell Publishing Ltd.