ACCA Strategic Business Reporting (SBR) Practice Exam

Why is it essential to provide reliable and relevant information according to IAS 8?

1. To comply only with statutory regulations

2. It aids stakeholders in making informed decisions based on financial statements

3. To maintain a competitive edge over other entities

4. It serves as a marketing tool for the company

The correct answer is: It aids stakeholders in making informed decisions based on financial statements

Providing reliable and relevant information is essential as it fundamentally supports the decision-making processes of stakeholders who rely on financial statements. According to IAS 8, high-quality financial reporting ensures that users—such as investors, creditors, and analysts—have access to accurate data that reflects the true financial performance and position of an entity. This enables stakeholders to make informed judgments about resource allocation, assess risks, and understand the entity's prospects. The focus on reliability ensures that the information presented is free from material misstatements and faithfully represents the economic phenomena it purports to depict. Relevance ensures that the information is meaningful and timely, addressing the needs of users when they are evaluating the company's financial health and performance. Thus, the provision of reliable and relevant information not only supports transparency in financial reporting but also fosters trust among stakeholders.