I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART A: THE CONTEXT AND PURPOSE OF FINANCIAL REPORTING 

 

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4

   Users' and stakeholders' needs 

4.1 The need for financial statements 

There are various groups of people who need information about the activities of a business.  

Why do businesses need to produce financial statements? If a business is being run efficiently, why 

should it have to go through all the bother of accounting procedures in order to produce financial 

information? 

The International Accounting Standard, IAS 1 Presentation of Financial Statements states: 

'The objective of financial statements is to provide information about the financial position, financial 

performance and cash flows of an entity that is useful to a wide range of users in making economic 

decisions.' 

 (IAS 1, para. 9) 

In other words, a business should produce information about its activities because there are various 

groups of people who want, or need, to know that information. This sounds rather vague: to make it 

clearer, we will study the classes of people who need information about a business. We also need to 

think about what information in particular is of interest to the members of each class.  

Large businesses are of interest to a greater variety of people and so we will consider the case of a large 

public company, whose shares can be purchased and sold on a stock exchange. 

4.2 Users of financial statements and accounting information  

The following people are likely to be interested in financial information about a large company with 

shares that are listed on a stock exchange. 

(a)