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- 5 Marks
Question
Financial Reporting is not an end in itself. Its usefulness is by reference to the users of General-Purpose Financial Reports (GPFR) and their information needs. Until the information provided meets the information needs of the users, that information is worthless. Thus, accountants must be knowledgeable of the class of users of the information and the need for such information. The Conceptual Framework identifies the primary users whose information needs should be paramount in the preparation of GPFR.
Required:
Discuss FOUR (4) matters that the information provided in a GPFR helps primary users to assess an entity. (5 marks)
Answer
- Performance Assessment: GPFR helps users assess the entity’s performance during the reporting period concerning operational and financial objectives.
- Liquidity and Solvency: GPFR provides information on the entity’s ability to meet short-term and long-term obligations, helping assess its financial stability.
- Service Delivery Sustainability: GPFR helps assess whether the entity can sustain its service delivery and operations over the long term, including changes due to the entity’s activities.
- Adaptability to Change: GPFR provides insights into the entity’s capacity to adapt to changes in economic or demographic conditions, impacting the services it provides.
- Tags: Financial Reporting, GPFR, Public Sector Accounting
- Level: Level 2
- Topic: General purpose financial reporting framework
- Series: NOV 2020
- Uploader: Joseph