ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
Which of the following is a limitation of general purpose financial reports, as recognised by the IFRS Conceptual Framework?
General purpose financial reports cannot supply all the information that investors, lenders and other creditors need, so users should also consider other sources such as general economic conditions and industry outlook. They are aimed at external users and do not require all assets at market value.
- AThey are prepared only for management and cannot be used by external parties
- BThey cannot provide all the information that existing and potential investors, lenders and other creditors need, so users must also consider other sourcesCorrect
- CThey must show every asset at its current market value
- DThey are required to be audited by the tax authority before publication
Explanation
The Framework acknowledges that general purpose reports cannot meet all users' information needs, and users need to consider information from other sources such as economic conditions and industry outlook. The other options are incorrect: the reports are for external users, there is no requirement for all assets at market value, and tax authorities do not audit them.
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