The Agency model, where the manager’s given objective is to maximise shareholder wealth, has a strong influence in preparing financial statements to gauge managerial performance. Financial statements are audited by an independent party to reasonably assure the accounting information is free from error and fraud. Therefore, accounting information has to be reliable, objective – and above all – independently verifiable. Furthermore, if there are two or more ways to record accounting information, the conservative way must prevail. The need for independent verifiability and conservatism cause financial statements to contain good historical information but say little of the firm’s future.