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buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of
credit. As many of the decisions made by the existing and potential investors, lenders and other creditors
of an entity are based on their respective expected returns (e.g. dividends, principal and interest
payments, market price increases, etc.) these users of financial statements need information to help them
assess the prospects for future net cash inflows to an entity.

The existing and potential investors, lenders and other creditors of the entity are explicitly identified as
the primary users to whom general purpose financial reports are directed. Without identifying such a
clearly defined group of primary users, a conceptual framework would risk becoming unduly vague or
abstract which would diminish its utility. These stated primary users typically are not in a position to
require entities to provide information directly to them and must rely on general purpose financial
statements to assist their decision making.

As individual primary users have differing information needs, and possibly even conflicting information
needs, the conceptual framework will seek to provide information which meets with the needs of the
maximum number of primary users. It is emphasised in the conceptual framework (par. OB8) that
focussing on the common information needs does not prevent an entity from providing additional
information that is useful to a specific subset of primary users.

Although the management of the entity is also interested in financial information about the entity, they
need not rely on general purpose financial reports to obtain their requisite information as they are able to
obtain financial information internally. Other parties such as regulators and members of the public (other
than investors, lenders and other creditors) may also find general purpose financial reports useful.
However, those reports are not primarily directed towards those groups.

1.2.2 Information about a reporting entity’s economic resources, claims and changes in
resources and claims

General purpose financial reports provide—

• information regarding the financial position of an entity in the form of information about the
economic resources of the entity as well as claims against it; and

• information regarding transactions and other events which change the economic resources and
claims against the entity.

Both sets of information assist users in making decisions about providing resources to the entity and it
follows that no one type of information is the primary focus of financial reporting.

1.2.2.1 Economic resources and claims (statement of financial position)

The financial strengths and weaknesses of an entity are communicated to users through the provision of
information about the nature and amounts of an entity’s economic resources and claims. Providing this
information will assist users in assessing the liquidity and solvency of the entity, its needs for additional
financing and also its likely success in obtaining that additional financing. Information about the payment
requirements of existing claims allows users to predict how future cash flows will be distributed amongst
those with a claim against the entity.

The conceptual framework (par. OB14) acknowledges that different types of economic resources may
affect the users’ assessment of the future cash flows of the entity differently. For example, certain cash
flows result directly from existing economic resources, such as trade receivables to be collected in cash,
while other cash flows are a result of using several resources in combination to produce and market goods
or services to customers of the entity. In the latter case, cash flows cannot be identified with the individual
resources, but users still need to know the nature and amount of these resources available for use in the
entity’s operations.

1.2.2.2 Changes in economic resources and claims

Changes in the economic resources and claims of an entity result from the following:

• The financial performance of the entity (discussed in section 1.2.2.2.1 and 1.2.2.2.2 below);

• other events and transactions, e.g. the issuance of new debt or equity instruments (discussed in
section 1.2.2.2.3 below).

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