ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs
Which of the following is a recognised limitation of general purpose financial reports?
General purpose financial reports cannot provide all the information that primary users need, so users must consult other sources such as economic conditions and industry news. They also rely on estimates and judgement, are aimed at external users, and do not require fair value for every item.
- AThey cannot provide all the information that primary users may needCorrect
- BThey are prepared only for the benefit of the entity's management
- CThey must show the fair value of every asset and liability
- DThey are guaranteed to be free from any estimates
Explanation
The Framework acknowledges that reports cannot give users all the information they need and that users must consider other sources. Reports also rely on estimates and judgement, are not for management only, and do not require fair value for every item.
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