The primary users of financial statements defined by the IASB,
Present and Potential Investors
Each of whom (including their advisors) make decisions about providing
resources to an entity. The IASB acknowledge that other groups such as employees,
regulators and the general public may also consider financial statements to be
useful, but the reports are not primarily directed to these other groups.
Purpose of Financial
Statements for Primary Users
Decisions by existing and potential
investors about buying, selling, or holding shares depend on their
expectations of dividends and share price growth. Similarly, decisions by
existing and potential lenders
and other creditors about
providing or settling loans or other forms of credit depend on the principal
and interest payments or other expected returns.
According to Kothari, (2010)
these primary user expectations about returns, depend on their assessment of
future net cash inflows for an entity. Consequently, these groups need
information to help them assess the prospects for future net cash inflows and
to attribute a value to the entity. To make this assessment, the primary users
use financial statements to obtain information about the entity’s resources,
claims against the entity and entity stewardship. Such information will allow
these capital providers to make decisions as to how to allocate their resources
to a particular entity and how to protect or enhance their interests.