Financial Reporting is not an end in itself. Its usefulness is by reference to the users of General-Purpose Financial Reports (GPFR), and their information needs. Until the information provided meets the information needs of the users, that information is worthless. Thus, accountants must be knowledgeable of the class of users of the information and the need for such information. The Conceptual Framework identifies the primary users whose information need should be paramount in the preparation of GPFR.
Required:
In line with the Conceptual Framework:
Discuss FOUR (4) matters that the information provided in a GPFR help primary users to assess an entity. (5 marks)
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- The performance of the entity during the reporting period in terms of meeting its operational and financial objectives;
- The liquidity and solvency (ability to meet current and long-term obligations) of the entity.
- The sustainability of the entity’s service delivery and other operations over the long term and changes therein as a result of the activities of the entity during the reporting period in terms of financial capacity and operational capacity.
- The capacity of the entity to adapt to changing circumstances such as change in demographic or economic condition that are likely to impact the nature or composition of the activities it undertakes and the services it provides.
(1.25 mark for each point explained = 5 marks)