Question

The objective of financial reporting places most emphasis on:

1. Reporting to capital providers.
2. Reporting on stewardship
3. Providing specific guidance related to specific needs.
4. Providing information to individuals who are experts in the field.

Short answer

The option “(a) Reporting to capital providers” is correct.

Step-by-step solution

Financial Reporting:

Financial reporting is a standard accounting practice that uses financial statements to provide a company’s financial performance over a specific period of time. It is usually provided quarterly or annually.

Explanation of Correct Option:

Capital providers are the investors who invest in the business. They are the primary users of financial statements. Any investor will have interest in a company`s financial position since their returns will depend on financial performance, financial position, financial information, etc. It is the responsibility and main aim of the company to report to the capital providers regarding financial information. They must be kept aware of the company’s position for long term association which increases the company’s reputation and gives trust.

Incorrect Option Explanation:

Option (b): This is just a summary of financial reports, how resources are used and accountability to management or directors.

Option (c): This is providing a set of rules or methods for the purpose of guidance as to how and what must be done depending on situation-specific needs.

Option (d): Providing information to individuals who are experts in the field

The main objective of financial reporting is not to provide information to experts since experts may have an interest in the company but not necessarily all the time associated with the company.

So, option (b), (c) and (d) are incorrect.