Question

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

There are various stakeholders of a company' s financial statements . Some of them are suppliers, creditors, bank, other financial institutions, customers, shareholders , potential investors, tax authorities , government etc. Everyone has a different need and differnet perspective. The different needs might be growth rate of the comt, profitability, long term solvency, short term solvency , financial structure, creditworthiness , efficiency of the company, dividend payments, earnings of the company etc. If we go on counting, there can be uncountable needs. The company cannot issue reports for each of the requirement. Hence a uniform report is produced which has all the information . The stakeholders are expected to have reasonable knowledge about the financial statements to interpret and calculate the information they need about the company. For simplification, the companies also issue financial ratio which measures different aspects of the business such as profitability , efficiency, debt paying ability etc. The financial reports issues follow the fundamental principle.of understandability and relevance . And hence the information is categorised for the stakeholders to easily get the information they need and also the source and evidence for every transaction is with the company. Auditing of the accounts make the financial statements more reliable.