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ACCA Applied Knowledge · Financial Accounting · Stakeholders' needs

Which statement about the information provided by the statement of financial position and the statement of profit or loss is most consistent with the IFRS Conceptual Framework's objective of financial reporting?

Financial statements help users assess the entity's prospects for future net cash inflows and how well management has looked after the entity's resources, known as stewardship. They do not guarantee going concern, compute tax payable or serve one particular shareholder's needs.

  1. AThe statements together help users assess the entity's prospects for future net cash inflows and management's stewardship of its resourcesCorrect
  2. BThe statements are mainly intended to show the amount of tax payable to the government
  3. CThe statements guarantee that the entity will remain a going concern for the next twelve months
  4. DThe statements are prepared to meet the specific requirements of the largest shareholder

Explanation

The Framework says users need information to assess prospects for future net cash inflows and management's stewardship of resources. Financial statements do not guarantee going concern, are not tax computations, and are general purpose rather than prepared for one shareholder.

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