ACCA Applied Knowledge · Financial Accounting · The context and purpose of financial statements for external reporting
Which of the following best describes the main objective of general purpose financial statements prepared under IFRS?
The objective of general purpose financial statements is to give information about the reporting entity that is useful to existing and potential investors, lenders and other creditors when they decide whether to provide resources to the entity. It is not about tax, internal budgeting or valuation.
- ATo provide information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resourcesCorrect
- BTo calculate the tax liability of the entity for the tax authorities
- CTo help managers decide on internal budgets and product pricing
- DTo show the exact market value of the entity to potential buyers
Explanation
The Conceptual Framework states that the objective of general purpose financial reporting is to provide information useful to existing and potential investors, lenders and other creditors in making resource decisions. Internal decision information is management accounting, and tax computations and market valuation are not the objective.
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