ESSAY

‘External Financial Reporting is concerned with the presentation of General Purpose Financial
Reports (statements) directed at

“Providing Information to meet the │common interests│ of │External Users│ who generally
│cannot prescribe the information│ they want from Organisations”

Firstly,

1. Based on the definition of general purpose financial statement above, briefly explain the 3 key points of the
definition.
1. Financial reporting results in general purpose financial statements that meet the common interests of
users. There are several potential groups of users of financial statements, each of which has different
interests and requires different information.

2. The definition indicates that the users are external to the entity.

3. The definition suggest that potential users of financial statement are those ‘cannot prescribe the
information they want from the manager’. This implies that the users of financial statement are in the
weak bargaining position and cannot demand information specific to their needs.