Users and Uses of Financial Statements

IAS 1 describes the financial statements as structured representation of the financial position and financial performance of an entity.


Financial statements are directed toward the common information needs of the users. These financial statements are considered general purpose reports and are intended to meet the needs of the users who are not in a position to demand reports tailored to meet their particular information needs.


The Framework enumerates the common users of the financial statements. They are the investors, employees, lenders, suppliers, and other trade creditors, customers, government and their agencies, and the public.

1. Investors. Investors are the providers of the risk capital and they, along with their advisers, are interested in information which enables them to assess the risk inherent to, and the return provided by, their investments. Financial information will help present investors to determine whether they should hold, sell, or increase their investments. Potential investors, on the other hand, will be able to determine whether or not they should buy an investment.
2. Employees. Employees and their representative groups are interested in information about the stability and profitability of their employers. The information provided by the financial statements helps them assess their employer's ability to provide just remuneration, viable retirement benefits and possible employment opportunities.
3. Lenders. Suppliers and other trade creditors. Financial statements provide lenders, suppliers and other trade creditors financial information necessary in determining whether their loans, related interest and all amounts owing to them will be paid when due. Potential lenders and creditors are guided by the information provided by the financial statements whether or not they would extend credit or loan to the enterprise.
4. Customers. Customers are interested about the continuance of the enterprise if they have a long term involvement or business relationship with the enterprise.
5. Government and Its agencies. The information provided by the financial statements will enable government and its agencies to regulate the activities of the enterprise and determine the appropriate allocation of resources through taxation policies being implemented. 
6. Public. Financial statements provide information about trends and recent developments, activities, and employment data of different enterprises. The public may use such information in a variety of ways.

It is to be noted that not all the information needs of these users are met by the financial statements. However, there are numerous common information needs that the financial statements can satisfy.