What expectations do accounting standard-setters have for financial statement readers’ accounting
knowledge?
Ans.
Accounting standard-setters do not cover the compliance with accounting expertise of financial statement
readers, but users of general-purpose financial reports are expected to have a “reasonable knowledge” of
business and economics. Financial reports are prepared for users who have a reasonable understanding
of business and economic activity and who diligently study and analyze the information, according to the
IASB Conceptual Framework for Financial Reporting. As a result, it appears that financial statements are
not designed to fulfill the demands of persons who have not studied financial accounting in any way.
Students should be taught to think about whether this expectation is ‘reasonable’ in the first place.