Understanding Accounting Information: Users, Disclosure, and Reliability

Stakeholders and Their Decision-Making Needs

Part A
1) Users of accounting informationThe textbook, Smart, Awan & Baxter, p. 21 lists the following stakeholders who have an interest in accounting information:
owners and investors
managers
creditors and lenders
employees
the government
a) Explain the meaning of ‘stakeholder’.
b) For each of the five listed stakeholders above, state:
i) a specific decision that the stakeholder would make, that would require accounting information before they made it
Note: do not use the same type of decision twice.
ii) the specific accounting information they would require for that decision
iii) the financial statement from which they would obtain that required information.
c) Smart, Awan & Baxter (text, chapter 2) outline two types of investor – current and prospective. Briefly describe two general types of information they are interested in, and what they use the information for.
d) The text (in chapter 2) further outlines three general types of information needs for managers. Briefly describe these three, and how managers would use this information.
e) Creditors are interested in solvency and security. Briefly define and explain these in relation to creditors’ needs.
2) Distinguish between ‘general purpose’ and ‘special purpose’ financial statements and outline the significance of this distinction.
3) It is vital that financial statements can be relied on. What steps would you recommend an organisation takes to ensure that the information in its financial statements achieves this?
4) Define and relate (with an example) each of the following accountingassumptions/principles.