The Failure of Decision Usefulness Approach on an Example of the New Standard for Revenue Recognition

The paper focuses on critical points of the decision usefulness approach to accounting. The decision usefulness approach may work under normal economic conditions for relatively uncomplicated spheres of financial reporting. However, under extreme conditions and/or for controversial issues, the standards setters may succumb to the lobby pressure exercised by the preparers of financial statements. A wide range of users, who may flourish from accounting information, is dispersed and thus they may lack willingness to pursuit benefits from new regulation. Contrariwise, companies are relatively homogeneous and small in number, so they have sufficient incentives to influence the outcome of standard-setting process. Companies’ eagerness to pressure on standard setters increases, if new regulation is expected to impact the presentation of financial position and performance in financial statements significantly. The hypothesis of potential failure of decision usefulness approach is scrutinized on an example of the new joint IASB’s and FASB’S standard on Revenue from Contracts with Customers using a critical analysis approach.