Users of Financial Statements

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TASK 1:
Financial statements are used by both internal and external users to make economic decisions. The information within the financial statement aims to provide information about the financial position, performance and any changes in financial position of an enterprise.

Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.

AstraZeneca is a global, innovative biopharmaceutical business whose mission is to make the most meaningful difference to the health of patients through great medicines and is focused on the discovery, development and commercialization of prescription medicine.

In the case of AstraZeneca the user needs of the financial statements are to assist in making decisions. The information needs may vary for each user because they are used for different purposes. The users of financial statements include present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the public. They use financial statements in order to satisfy some of their different needs for information.

Shareholders and Investors - The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by, their investments. They need information to help them determine whether they should buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of AstraZeneca to pay dividends.

The Employees of AstraZeneca and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the company to provide remuneration, retirement benefits and employment opportunities. Employees also need these reports in making collective bargaining agreements with management, in the case of labor unions or for individuals in discussing their compensation (increases), promotion and rankings.

Financial institutions (banks and other lending companies) use the financial statements of AstraZeneca to decide whether to grant them with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures. Lenders are interested in information that enables them to determine whether their loans, and the interest attaching to them, will be paid when due.

AstraZeneca’s suppliers who extend credit to them require financial statements to assess the creditworthiness of the business to ensure that they can be paid amounts owing to them when due.

As stated in the scenario, AstraZeneca developed innovative new products to meet medical needs of customers, therefore, the customers need for the financial statement is to determine whether AstraZeneca will continue to operate as they are dependent on the medicines that the develop. It is not feasible to have sole dependence on a product then to realize that it will not be accessible in the near future.

The Government and their agencies need AstraZeneca’s financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by the company. It is also need to determine how the resources of the company are allocated, to regulate the activities of the company, and for national income and similar statistics.

Because enterprises affect members of the public in a variety of ways the media and the general public are also interested in financial statements for a variety of reasons such as to assess the trends and recent developments in the prosperity of AstraZeneca and the range of its activities. For example, enterprises may make a substantial contribution to the local economy in many ways including the number of people they employ and their patronage...
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