This Objectives Of General Purpose Financial Reporting reflects several value judgements made by the IASB and the FASB about the role of financial statements, which are described in the Basis for Conclusions on Chapter 1: The objective of general purpose financial reporting. The Basis for Conclusions includes the following arguments:

• Financial statements should reflect the perspective of the entity rather than the perspective of the entity’s equity investors. The focus is then on the entity’s resources and the changes in them rather than on the shareholders as owners of the entity. Shareholders are providers of resources as are those who provide credit resources to the entity. Under the entity perspective, the reporting entity is deemed to have substance of its own, separate from that of its owners (paragraph BC1.8).

• The key users of financial statements are capital providers — existing and potential investors and lenders. An entity obtains economic resources from capital providers in exchange for claims on those resources. Because of these claims, capital providers have the most critical and immediate need for economic information about the entity. These parties also have common information needs. The focus on these users of information, as opposed to other potential users such as government, regulatory bodies, employees and customers is a narrowing of the user groups in comparison to the groups considered in the former version of the IASB Conceptual Framework (paragraphs BC1.9–1.12).

Before the objectives of general purpose financial reporting can be achieved in practice, the basic qualitative characteristics of financial reporting information need to be specified. Further, it is necessary to define the basic elements — assets, liabilities, equity, income and expenses — used in financial statements.