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Users of financial statements Financial statements are used by a variety of groups for a variety of reasons. The framework surrounding IAS identifies the typical user groups of accounting statements. The table below identifies the user groups (stakeholders) and gives likely reasons for the user groups to refer to financial statements: Main users Reasons for use Investors •To assess past performance as a basis for future investment. Employees •To assess performance as a basis of future wage and salary negotiations. •To assess performance as a basis for continuity of employment and job security. Lenders •To assess performance in relation to the security of their loan to the company. Suppliers •To assess performance in relation to them receiving payment of their liability. Customers •To assess performance in relation to the likelihood of continuity of trading Government •To assess performance in relation to compliance to regulations and assessment of taxation liabilities. Public •To assess performance in relation to ethical trading Qualitative characteristics Financial statements are prepared for a variety of reasons. The information provided by them is useful to users. IAS sets out four qualitative characteristics of the financial statements:•Understandability– the information is readily understandable by users. •Relevance– the information may be used to influence economic decisions of users. •Reliability– the information is free from material error and bias. •Comparability– the information enables comparisons over time to identify and evaluate trends.
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