Describe the factors involved in communicating useful financial information.
What will be an ideal response?
Answers will vary.
The primary factors involved in communicating useful information include the following: understanding who the users are, knowing for what purpose the information will be used, and understanding the process by which the information is analyzed. According to the FASB, financial statement information should be understandable to a person with a reasonable knowledge or one who has the capacity and willingness to achieve a reasonable knowledge of business. Financial statements are general purpose statements, meaning they are prepared for use by a wide variety of parties rather than being aimed at one specific group. Because of this, some disclosed information may be irrelevant to some users but vital to others. Finally, because of the many categories of users, the different levels of knowledge, the varying needs of users, and the general nature of financial statements, users must be prepared to apply a wide variety of analysis techniques to fully understand the information received.
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