The primary users of general purpose financial reporting are present and potential investors, lenders and other creditors, who use that information to make decisions about buying, selling or holding equity or debt instruments, providing or settling loans or other forms of credit, or exercising rights to vote on, or otherwise influence, management’s actions that affect the use of the entity’s economic resources. [1.2]
The primary users need information about the resources of the entity not only to assess an entity's prospects for future net cash inflows but also how effectively and efficiently management has discharged their responsibilities to use the entity's existing resources (i.e., stewardship). [1.3-1.4]
The IFRS Framework notes that general purpose financial reports cannot provide all the information that users may need to make economic decisions. They will need to consider pertinent information from other sources as well. [1.6]
The IFRS Framework notes that other parties, including prudential and market regulators, may find general purpose financial reports useful. However, these are not considered a primary user and general purpose financial reports are not primarily directed to regulators or other parties. [1.10]
Information about a reporting entity's economic resources, claims, and changes in resources and claims
Economic resources and claims
Information about the nature and amounts of a reporting entity's economic resources and claims assists users to assess that entity's financial strengths and weaknesses; to assess liquidity and solvency, and its need and ability to obtain financing. Information about the claims and payment requirements assists users to predict how future cash flows will be distributed among those with a claim on the reporting entity. [1.13]
A reporting entity's economic resources and claims are reported in the statement of financial position. [See IAS 1.54-80A]
Changes in economic resources and claims
Changes in a reporting entity's economic resources and claims result from that entity's performance and from other events or transactions such as issuing debt or equity instruments. Users need to be able to distinguish between both of these changes. [1.15]
Financial performance reflected by accrual accounting
Information about a reporting entity's financial performance during a period, representing changes in economic resources and claims other than those obtained directly from investors and creditors, is useful in assessing the entity's past and future ability to generate net cash inflows. Such information may also indicate the extent to which general economic events have changed the entity's ability to generate future cash inflows. [1.18-1.19]
The changes in an entity's economic resources and claims are presented in the statement of comprehensive income. [See IAS 1.81-105]
Financial performance reflected by past cash flows
Information about a reporting entity's cash flows during the reporting period also assists users to assess the entity's ability to generate future net cash inflows and to assess management’s stewardship of the entity’s economic resources. This information indicates how the entity obtains and spends cash, including information about its borrowing and repayment of debt, cash dividends to shareholders, etc. [1.20]
The changes in the entity's cash flows are presented in the statement of cash flows. [See IAS 7]
Changes in economic resources and claims not resulting from financial performance
Information about changes in an entity's economic resources and claims resulting from events and transactions other than financial performance, such as the issue of equity instruments or distributions of cash or other assets to shareholders is necessary to complete the picture of the total change in the entity's economic resources and claims. [1.21]
The changes in an entity's economic resources and claims not resulting from financial performance is presented in the statement of changes in equity. [See IAS 1.106-110]
Information about use of the entity’s economic resources
Information about the use of the entity's economic resources also indicates how efficiently and effectively the reporting entity’s management has used these resources in its stewardship of those resources. Such information is also useful for predicting how efficiently and effectively management will use the entity’s economic resources in future periods and, hence, what the prospects for future net cash inflows are. [1.22]
