Abstract
This paper discusses some existing and potential roles of financial reporting disclosures. The focus is on what are conventionally termed mandatory disclosures, although as Sunder (1997) points out the distinction between mandatory and voluntary is somewhat arbitrary. The paper views disclosure through the lens of incentives. Accounting disclosures are a component of the broad set of information shareholders, debt holders, and other accountees have to assess the stewardship of accountors. Whether disclosure, increased judgment in the treatment of recognized amounts, or a combination of the two is the best way to move preparers away from a compliance focus to a communication focus seems an important question for the regulators to continue grappling with. New insights should emerge because of institutional differences between recognition and disclosure. Disclosures seem more difficult to incorporate in explicit contracts than recognized amounts, so limited contract forms seem natural to explore as reasons for less than full disclosure.