Objectives of Financial Reporting by Business Enterprises (FASB-CON No 1)

Financial Accounting Standard Board - Statement of Financial Accounting Concepts No. 1 stated that financial reporting includes not only financial statements but also other means of communicating information that relates, directly or indirectly, to the information provided by the accounting system—that is, information about an enterprise's resources, obligations, earnings, etc. Management may communicate information to those outside an enterprise by means of financial reporting other than formal financial statements either because the information is required to be disclosed by authoritative pronouncement, regulatory rule, or custom or because management considers it useful to those outside the enterprise and discloses it voluntarily. Information communicated by means of financial reporting other than financial statements may take various forms and relate to various matters.

The summary of FASB-Statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises (SFAC-CON No 1) is as follows:

• Financial reporting is not an end in itself but is intended to provide information that is useful in making business and economic decisions.
• The objectives of financial reporting are not immutable—they are affected by the economic, legal, political, and social environment in which financial reporting takes place.
• The objectives are also affected by the characteristics and limitations of the kind of information that financial reporting can provide.

• The information pertains to business enterprises rather than to industries or the economy as a whole.
• The information often results from approximate, rather than exact, measures.
• The information largely reflects the financial effects of transactions and events that have already happened.
• The information is but one source of information needed by those who make decisions about business enterprises.
• The information is provided and used at a cost.