ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
According to the IFRS Conceptual Framework, what is the objective of general purpose financial reporting?
The objective of general purpose financial reporting is to give information about the reporting entity that helps existing and potential investors, lenders and other creditors decide whether to provide resources to it. It is not designed for tax calculation, internal management control or valuing the entity.
- ATo provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entityCorrect
- BTo provide tax authorities with the information needed to calculate the taxable profit of the entity
- CTo provide management with detailed cost information for internal planning and control
- DTo show the market value of the entity so that shareholders can decide when to sell their shares
Explanation
The Conceptual Framework states that the objective is to provide useful information to existing and potential investors, lenders and other creditors for resource-allocation decisions. Tax computations and internal cost information are separate purposes, and financial statements do not aim to show the entity's market value.
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