Financial Accounting · Stakeholders' needs

Users of Financial Statements and Their Information Needs

Updated 11 October 2026 · Fact-checked

Users of financial statements are the people who rely on a company's reports to make decisions. Main groups are investors, lenders, employees, suppliers, customers, government and the public. To answer a question, identify the user, state the decision they face, then match it to the information that helps them.

Understand Users of Financial Statements and Their Information Needs

Financial statements are not written for one reader. They are prepared for many people who cannot demand tailor-made reports from the company. Under the IASB Conceptual Framework, the primary users are existing and potential investors, lenders and other creditors. They provide resources to the entity, so the general purpose financial statements focus on their needs.

Other groups also read the reports. Employees want to know if their jobs and pay are secure. Suppliers want to know if they will be paid. Customers want to know the business will survive to supply goods and honour warranties. Government and tax authorities want to assess tax and regulate activity. The public may want to know how the entity affects the local economy, for example through jobs and local purchasing.

Each group asks a different question. Investors ask about return and risk. Lenders ask about ability to pay interest and repay the loan. Employees ask about stability and ability to pay wages. So the same statements are read for different purposes: profit and dividends for investors, cash and liquidity for lenders and suppliers.

Users are often split into internal users and external users. Internal users, such as managers and directors, can get detailed management information on request. External users cannot, so they depend on published financial statements. This is why financial statements are general purpose, not designed for any single group.

No set of statements can meet every need. Statements show mostly past, financial information. Users must combine them with other sources. In exams, always tie the user to a specific decision.

Key formulas to remember

Primary users (Conceptual Framework): Existing and potential investors + lenders + other creditors; They are the primary users because they provide resources and cannot demand reports tailored to them.
Internal vs external users: Internal = managers and directors; External = everyone else; Internal users can get management information. External users rely on published financial statements.
Core method: User → decision → information needed; Use this chain for any question on information needs.

How to solve Users of Financial Statements and Their Information Needs questions

Use this method for any question asking who uses financial statements or what they need.

1Read the question and note whether it asks for the user, the need, or both.
2Identify the user group named or described in the scenario.
3Decide whether the user is internal or external, and whether primary or other.
4State the decision that user faces, for example lend, invest, supply on credit or accept a job.
5Match the decision to specific information: profit, cash, liquidity, gearing, dividends or prospects.
6Check the other answer options against this and remove any that fit a different user.
7For multiple response questions, count the number of answers required and select exactly that many.

Quickest way: One-line pairing for each user

When to use it: Use this in multiple choice and multiple response questions when you have under a minute.

Investors: profit, dividends, growth and risk.
Lenders: ability to pay interest and repay loans, security.
Employees: stability, profitability, pay and pensions.
Suppliers: ability to pay on time, liquidity.
Customers: continuity of supply and survival.
Government: tax, regulation, statistics.
Public: effect on the community and local economy.

Common mistakes in Users of Financial Statements and Their Information Needs

Saying managers are the primary users of general purpose financial statements.
Managers use accounts heavily, so students assume they are the main audience.
Fix: Remember that managers are internal users who can get management information. The primary users are investors, lenders and other creditors.
Giving the same need, such as 'profit', for every user.
Profit is the most familiar figure in accounts.
Fix: Link each user to their own decision. Lenders and suppliers care more about cash and liquidity.
Treating government only as a tax collector.
Tax is the most obvious government interest.
Fix: Also mention regulation, resource allocation and national statistics.
Confusing investors with lenders.
Both provide finance.
Fix: Investors own the entity and seek returns and growth. Lenders are creditors who seek interest and repayment.
Writing a list of users without explaining needs when asked to 'explain'.
Students rush to name groups.
Fix: Write at least one specific piece of information for each user and why they need it.

Worked examples

Example 1

A bank is considering a loan to a company. Which information in the financial statements is MOST relevant to the bank? Options: A) Dividend growth over five years; B) Ability to pay interest and repay the loan; C) Staff turnover; D) The company's contribution to local charities.

Show the solution

The user is a lender, an external primary user.
The lender's decision is whether to grant the loan.
The key concern is whether interest and capital will be repaid.
Option A suits shareholders. Option C suits employees. Option D suits the public.
Option B matches the lender's decision.

Answer: B) Ability to pay interest and repay the loan.

Example 2

Explain the information needs of a supplier who is deciding whether to sell goods to a company on credit.

Show the solution

The user is a supplier, an external user who is also a creditor.
The decision is whether to supply on credit and on what terms.
The supplier needs to judge whether it will be paid on time.
Relevant information: cash and bank balances, current assets compared with current liabilities, and how quickly the company pays its payables.
The supplier will also consider whether the company is likely to continue trading, as this affects long-term supply.

Answer: The supplier needs information on liquidity, cash, payment record and going concern, to judge whether it will be paid on time and whether the relationship is likely to continue.

Exam tips

Always link each user to a decision. Marks are earned for the link, not the label.
In multiple response questions, select exactly the number stated. Selecting more or fewer scores nothing.
Watch for 'internal' and 'external' in the wording. Managers and directors are internal.
If an option fits a different user group better, eliminate it, even if it sounds plausible.
For short written parts of multi-task questions, give one clear need per user rather than long lists.

Practice questions from Stakeholders' needs

Users of Financial Statements and Their Information Needs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Users of Financial Statements and Their Information Needs: frequently asked questions

Who are the primary users of financial statements?

They are existing and potential investors, lenders and other creditors. They provide resources to the entity and cannot demand reports made for them. Financial statements are mainly aimed at their needs.

What is the difference between internal and external users?

Internal users, such as managers and directors, are inside the entity and can obtain detailed management information. External users, such as shareholders, lenders and the government, rely mainly on published financial statements.

Why can financial statements not meet every user's needs?

Users have different needs, and the statements are general purpose. They mostly show past financial information. Users must combine them with other sources of information.

What do employees want from financial statements?

Employees want to assess the stability and profitability of the employer. This helps them judge job security, ability to pay wages and pensions, and prospects for promotion.