ACCA SBR ^INT Syllabus B. The Financial Reporting Framework - The Objectives Of Financial Reporting - Notes ^{3 / 18}

This chapter sets out:

The objective of general purpose financial reporting
Information needed
Who the primary users of financial reports are.

Stewardship

Users need information to help them assess management’s stewardship. 

This chapter states that users need information to help them assess management’s stewardship so that they can hold management to account for resources entrusted to their care. 

This assessment in turn helps users make decisions about providing resources to the entity, which is the objective of general purpose financial reporting.

Users of financial reports

Users are investors, lenders and other creditors. 

Those users must rely on financial reports for much of the financial information they need.

Limitations of Financial Reporting

Users cannot require reporting entities to provide information directly to them, so must rely on general purpose financial reports 

However, these cannot provide all of the information needed. 

Information from other sources is needed, for example, general economic conditions and expectations, political events and industry/company outlooks.

1. Financial accounts are not designed to show the value of an entity; but they help users estimate it

2. Different users have different needs

   Standards try to meet the needs of the maximum number of primary users. 

   (However, an entity can include additional information for a particular subset of primary users)

3. Management need not rely on general purpose financial reports because it is able to obtain the financial information it needs internally.

4. Regulators and the public may also find general purpose financial reports useful. 

   However, those reports are not primarily directed to these other groups.

5. Financial reports are based on estimates and judgements 

   The Conceptual Framework establishes the concepts that underlie those estimates

   The Conceptual Framework’s vision of ideal financial reporting is unlikely to be achieved in full, because it takes time to understand, accept and implement new ways of analysing transactions and other events.