Financial statement users and their needs.

There are various stakeholders group that need financial information.

Below is the list of some users of financial statements and their needs.

Equity investors (existing and potential) – these categories of users are the owners of the business enterprises, and they require information on

  1. return on investment such as earning yield, dividend yield and so forth
  2. stewardship of management; that is management conduct in the use of resources
  3. the long term stability and solvency of the enterprise.

Lenders (existing and potential) – these are stakeholders who have lent resources to an enterprise for example lending financial institutions etc. lenders generally will require information on the following areas of performances;

  1. The generality of the enterprises and its ability to repay its debt when due.
  2. Nature of asset to be used as security for debt
  3. Profitability of projects for lending that is tied to specific projects and repayment of which depends on the project outcome.
  4. The level of financial gearing.

Employees (past, existing and potential) – these categories of users are those who have been employed by the enterprise. Such stakeholders may require information that reflect the following;

  1. job security (financial stability and level of gearing)
  2. viability of pension plans and schemes
  3. condition of service and remunerations

Government – government is an interested party through various agencies such as:

  1. tax authorities – assessment of taxable income and liabilities.
  2. local authorities – rate assessment and determination.

Regulatory bodies Рbodies concerned with regulation of commerce and industry need information reflecting  whether business enterprise have complied with policy directives. Example of regulatory bodies include stock exchanges and mining and mineral commissions.

Management of the enterprise  Рthis is an important user of financial statements. This category of user is the only that have restricted access to all of its information needs.

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  1. Pingback: Key points from ISA 200 (Overall objective of the independent auditor and the conduct of an audit in accordance with ISAs). – ACCOUNTING CLASS

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