Who Would Report if Reporting Were Voluntary?
Tarazania is a country with a small but active stock market. However, the country has no accounting standards; in fact, the issuance of financial statements is illegal. This odd law stems from the fact that the founding king of Tarazania once took an intermediate accounting course and was so overwhelmed by the chapter on the statement of cash flows that he vowed he would never view another financial statement again. As a result, none of the 100 companies with publicly traded stocks in Tarazania have ever made financial statements available to the public. Of course, each of these companies has prepared financial statements and other reports for use internally for years. Last week Tarazania’s founding king died. His eldest daughter has now ascended to the throne. Her Majesty has been a secret aficionado of financial statements for years. One of her first official acts was to make the public release of financial statements legal but not mandatory. Of the 100 publicly traded companies in Tarazania, which will be the first to release its financial statements to the public? Will all 100 companies do so?