Information for external users

What do we mean by external users and who are they? External users of accounting information are individuals and other enterprises that have a financial interest in the reporting enterprise, but that are not involved in the day-to-day operations of that enterprise. External users of financial information may include the following:

  • Owners

  • Creditors

  • Labor unions

  • Governmental agencies

  • Suppliers

  • Customers

  • Trade associations

  • General public

Each of these groups of external decision makers requires unique information to be able to make decisions about the reporting enterprise. For example, customers who purchase from the enterprise need information to allow them to assess the quality of the products they buy and the faithfulness of the enterprise in fulfilling warranty obligations. Governmental agencies may have an interest in whether the enterprise meets certain governmental regulations that apply. The general public may be interested in the extent to which the reporting enterprise is socially responsible (for example, does not pollute the environment).

Providing information that meets the needs of such a large set of diverse users is difficult, if not impossible, in a single set of financial information. Therefore, external financial reporting is directed toward the information needs of two primary groups—investors and creditors. As you will soon see, investors are individuals and other enterprises that own the reporting enterprise. Creditors, on the other hand, are individuals and other enterprises that have provided credit to the reporting enterprise. For example, a commercial bank may have loaned money to the reporting enterprise, or a supplier may have permitted the reporting enterprise to purchase goods and to pay for those goods later. Our assumption is that by meeting the financial information needs of investors and creditors, we provide information that is also useful to many other users of financial information.

Be the first to comment on "Information for external users"

Leave a comment

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.