Standard setters have adopted the decision-usefulness objective for financial reporting. Such an approach is based on the view that accounting information is actually used by investors in making resource allocation decisions and setting the price of shares. Student A argues that investors do rely upon accounting earnings to revise their estimates around security prices, therefore accounting standards are correct to reflect this objective. Student B argues that earnings show at best a weak association with changes in share prices and the annual report appears to have mainly a confirmatory purpose, therefore standard setters should be more concerned with the monitoring and control (stewardship) objectives of accounting. In Australia the AASB has shifted its focus to recognise decision useful as the primary objective for financial reporting. This primarily based on the view that investors use accounting information in deciding resource allocation decisions and setting share prices. Ball and Brown tested the usefulness of historical cost profit figure to investment decisions. The state that if information within the profit figure were useful and informative in making investment decisions then it is likely that prices and trading volume would adjust to reflect that information. They go to argue that unexpected increases in profit will be a result of the introduction of new information into the market. In an efficient capital marker, any changed in the firms expected cash flow will result to alternations in share price. This change will occur just before or very quickly after the profit data is released. Ball and Brown examined data from 261 US firms and classified the impacts of unexpected information on share price. The outcomes were either favourable where reported profits were greater than predicted by forecasting models and unfavourable when reported profit was less than the previous year's. The influence of accounting information on investor behaviour · Historical cost profit release have information content for the marketplace in terms of CARs and the effect on volatility and trading volume. · Information asymmetry affects the responsiveness of price changes, the nature of the price changes, and the volume of trade following profit announcements. · There is continuous information set which is used by the market and, therefore, accounting reports are not the only sources of information. · Longer terms