Explaining the Reason for Governance - ASSIGNMENT

Prepare brief notes to answer the following questions from a shareholder.

  a) Can you give me two examples of primary users outside of the company, other than myself and the other shareholders, who may be interested in the financial statements of the company? For each user can you tell me for what purpose they would use them?

      1) Investors - to enable them to assess how effectively management has fulfilled its stewardship role and consider information that is useful in taking decisions about their existing investment or potential investment in the entity

      2) Lenders - to assess whether loans will be repaid and   related interest will be repaid when due/to help potential lenders decide whether to lend and what terms

  b) With reference to the definitions within the conceptual framework, please explain why the plant and machinery (included in the non-current assets of the company) is classified as an “asset” of the business?

      Assets   is resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
      Plant and machinery is included as non current assets, because of following reasons:
        • the enity can decide when and how to use the asset
        • the asset was bought in the past
        • the asset can be used to manufacture products which can be sold and cash received

  c) With reference to the definitions within the conceptual framework, please explain why a bank loan is classified as a “liability” of the business?

      Liabilities is present obligations of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

      Bank loan is classified as a "liability" of the business because that:
        • The loan was taken in the past by entity, with aim to improve...