Question

After arguing that financial reporting has lost most of its usefulness, why didn’t Lev and Gu recommend replacing traditional financial statements with the Strategic Resources & Consequences Report?

Answer 1

Lev and Gu did not recommend replacing traditional financial statements with the Strategic Resources & Consequences Report because they want to address the problem of the deterioration in accounting and financial reporting. Their analysis led them to conclude that the need of the hour is to ensure that accounting and financial reporting becomes relevant and viable again in such a manner that information needs of investors and other users of financial reports are tangibly and systematically satisfied. To ensure that financial reports are useful to investors there is no need to replace traditional financial statements with the Strategic Resources & Consequences Report, rather the traditional financial statements and reports can strengthen their informational relevance by borrowing elements from Strategic Resources & Consequences Report.

Lev and Gu wants to remove the obscurity and the unreadability that the present financial reports suffer from, they do not want to completely replace them. Replacing them with Strategic Resources & Consequences Report will not serve the purpose and probably in future the traditional financial reports will have to be augmented with and supported by the Strategic Resources & Consequences Report.