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Purpose of Financial
Statements
7. Financial
statements are a structured representation of the financial
position and financial performance of an entity. The objective
of general purpose financial statements is to provide
information about the financial position, financial
performance and cash flows of an entity that is useful to a
wide range of users in making economic decisions. Financial
statements also show the results of management’s stewardship
of the resources entrusted to it. To meet this objective,
financial statements provide information about an entity’s:
(a) assets;
(b) liabilities;
(c) equity;
(d) income and
expenses, including gains and losses;
(e) other changes in
equity; and
(f) cash flows.
This information,
along with other information in the notes, assists users of
financial statements in predicting the entity’s future cash
flows and, in particular, their timing and certainty.
Components of
Financial Statements
8. A complete set of
financial statements comprises:
(a) a balance sheet;
(b) an income
statement;
(c) a statement of
changes in equity showing either:
(i) all changes in
equity, or
(ii) changes in
equity other than those arising from transactions with
equity holders acting in their capacity as equity
holders;
(d) a cash flow
statement; and
(e) notes,
comprising a summary of significant accounting policies and other
explanatory notes.
9. Many entities
present, outside the financial statements, a financial review
by management that describes and explains the main features of
the entity’s financial performance and financial position
and the principal uncertainties it faces. Such a report may
include a review of:
(a) the main factors
and influences determining financial performance, including
changes in the environment in which the entity operates, the
entity’s response to those changes and their effect, and the
entity’s policy for investment to maintain and enhance
financial performance, including its dividend policy;
(b) the entity’s
sources of funding and its targeted ratio of liabilities to
equity; and
(c) the entity’s
resources not recognised in the balance sheet in accordance
with IFRSs.
10. Many entities
also present, outside the financial statements, reports and
statements such as environmental reports and value added
statements, particularly in industries in which environmental
factors are significant and when employees are regarded as an
important user group. Reports and statements presented outside
financial statements are outside the scope of IFRSs.
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