ACCA Applied Skills · Financial Reporting · The need for a conceptual framework and the characteristics of useful information
Under the IASB's Conceptual Framework for Financial Reporting, which of the following correctly identifies the primary users to whom general purpose financial reports are directed?
The primary users are existing and potential investors, lenders and other creditors. They make decisions about providing resources to the entity and cannot require it to supply information directly, so they rely on general purpose financial reports. Management and regulators can request tailored information instead.
- AExisting and potential investors, lenders and other creditors who cannot require the entity to provide information directly to themCorrect
- BManagement, tax authorities and regulators who can demand tailored reports from the entity
- CEmployees, customers and the general public, whose information needs take priority over those of capital providers
- DExisting shareholders only, because they hold the residual claim on the entity's assets
Explanation
The Conceptual Framework states that the primary users are existing and potential investors, lenders and other creditors who need information to make decisions about providing resources to the entity and who cannot demand information directly. Management and regulators can obtain tailored information, so they are not the primary users. Limiting users to existing shareholders ignores potential investors and creditors.
Did you get it right without looking?
One question tells you little. A timed set on The need for a conceptual framework and the characteristics of useful information shows your real accuracy, how long you take and where you lose marks.
More The need for a conceptual framework and the characteristics of useful information questions
- Zeta Co's directors have decided to cease trading in six months and sell all assets. Which statement about preparing Zeta's financial statem…
- Before the IASB issued its Conceptual Framework, standard setters often developed accounting rules case by case. Which of the following is t…
- Which of the following is NOT an objective or purpose of the Conceptual Framework as stated by the IASB?
- Kappa Co has a 31 December reporting date. On 15 February, before the financial statements were authorised for issue, its main factory was d…
- Which of the following statements about the status of the IASB's Conceptual Framework for Financial Reporting is correct?
- Under the IASB's Conceptual Framework for Financial Reporting, which underlying assumption is stated as the one on which general purpose fin…