Question

From the latest annual report of BHP Group Ltd, to define, describe and critically discuss the objectives of general purpose financial reporting (GPFR)? identify if BHP group ltd report is a GPFR and if the objectives of GPFR are achieved by BHP company?

Answer 1

Objectives of general purpose financial reporting :

Paragraph OB2 of the IASB Conceptual Framework states The objectives of general purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit.

This Objectives Of General Purpose Financial Reporting reflects several value judgements made by the IASB and the FASB about the role of financial statements, which are described in the Basis for Conclusions on Chapter 1: The objective of general purpose financial reporting. The Basis for Conclusions includes the following arguments:

• Financial statements should reflect the perspective of the entity rather than the perspective of the entity’s equity investors. The focus is then on the entity’s resources and the changes in them rather than on the shareholders as owners of the entity. Shareholders are providers of resources as are those who provide credit resources to the entity. Under the entity perspective, the reporting entity is deemed to have substance of its own, separate from that of its owners (paragraph BC1.8).

• The key users of financial statements are capital providers — existing and potential investors and lenders. An entity obtains economic resources from capital providers in exchange for claims on those resources. Because of these claims, capital providers have the most critical and immediate need for economic information about the entity.