Question

Question five:

Decisions makers need information that is useful in making rational decisions, the decisions makers are different and need different information, so every groups of users need different information, but accounting cant adopts the idea of producing a series of special- purpose report, instead that FASB and IAS adopt uniform report which contain information has several characteristics such as understandability, benefits costs, relevance and reliability, explain?

Answer 1

Answer :

Uses of financial information in decision making:

• in any business the management needs to take various kind of important decisions time to time.
• this decisions requires relevant information to be analysed to reach on a conclusion
• financial information plays a very important role in the decision making process of Management.
• this financial information should be quantitative and qualitative to be useful to the decision makers

Users of financial statement.

there are various type of decision makers uses of financial management

• Owners need financial information to know profits and financial position of business , to assess about how business is performing, and how much is the returns.
• Investors require financial information to understand about the financial position of business to decide whether they should invest their money in business or not.
• Management requires information to understand about the operations and performance of business and making relevant decisions.

Qualitative Characteristics of useful information as per FASB and IAS :

important characteristics of useful information is defined under Financial Accounting standard board ( FASB ) and international accounting standards (IAS).

• Understandability: Financial information should be understandable for the user. It should be according to acceptable Financial reporting framework.
• Benefits costs: Financial information should reflect all the useful information related to costs and benefits incurred in business during a period. Benefits should be more than cost in any accounting period .
• Relevance : The information to be useful , should be relevant to the period which it reports .
• Reliability : Information should be reliable and based on the verifiable data, on which user can base his decision. it should be accurate and complete.

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