New

DipIFRS ACCA course - The objective of financial reporting No.4

DipIFRS ACCA course - The objective of financial reporting No.4


the primary users of financial reporting for general purposes are:

1. Current and potential investors.

2. Current and potential lenders.

3. Other creditors.


Who use that information to make decisions about:

1. Buying equity or debt instruments.

2. Selling equity or debt instruments.

3. holding equity or debt instruments.

4. providing or settling loans or other forms of credit.

5. Exercising rights to vote on.

Or influence in another way (otherwise influence) the management's actions that affect the use of the entity's economic resources.


Primary users need information about the resources of the entity not only for:

1. An assessment of the entity's prospects for future net cash inflows.

2. But also how effective and efficient the management is in fulfilling its responsibilities to use the entity's existing resources (ie, stewardship).

The IFRS Framework notes that general purpose financial reporting cannot provide all the information that users may need to make economic decisions. They will need to look at relevant information from other sources as well.

Also, users of financial statements can be divided into ..

External users .. these might be referred to as Outsiders

Internal users .. and these can be referred to as Insiders

An example is Outsiders ..


1.Competitors

2. Customers

3. Governments

4. Investment analysts

5. Lenders

6. Rating agencies

7. Suppliers

An example is Insiders ..


1. Managers

2. Company officers

3. Financial directors

4. Production supervisors




The IFRS framework notes that other parties include:


1. Prudential regulators.

2. financial market regulators.

You may find general purpose financial reports helpful.




However, these are not considered essential user and general purpose financial reporting is not primarily directed at:

1. Regulators.

2. Or other parties.




The IFRS framework notes that other parties include:


1. Prudential regulators.

2. financial market regulators.

You may find general purpose financial reports helpful.

Prudential regulation is a type of financial regulation that requires financial firms to:

1. Control risks.

2. And maintain adequate capital .. As defined in:

1. Capital requirements.

2. Liquidity requirements.

3. The imposition of concentration risk (or large exposures) limits.

4. Related reporting and public disclosure requirements.

5. Supervisory controls and processes.

Prudential regulation can be divided into:


1. Micro prudential regulation focusing on individual firms and ensuring their ability to withstand shocks.

2. Macroprudential regulation that views the entire financial system and systemic risk, "market risk."

The objectives of market regulation are:

1. Control fraud.

2. Control agency problems. Ensure that agents comply with competency standards.

3. Promote fairness.

4. Set mutually beneficial standards.



PDF File

No comments