Which Of The Following Is Not Normally An Objective Of Financial Reporting?

The correct choice is d), as usually, it is not the main purpose or objective of Financial Reporting to provide the liquidation value of an entity and, normally, it is prepared to provide information of ongoing or carrying on business (based on going-concern concept) which is still not going into liquidation near future. In fact, it provides information of company’s financial performance and financial position, cash flows activities, movements of equity, profitability, liquidity, etc., to Users of Financial Information both internal users such as Owners, Board of Directors, Management, Employees and external users such as Shareholders, Investors, Creditors, Suppliers / Vendors, Professional Bodies such as Audit Firms & Law Agencies, Government, etc.

However, in case of liquidation of the business, or when the entity wants to check the investment opportunities for investors or lending risks for creditors i.e., whether the entity will pay to creditors out of its physical assets (land & buildings, property, plant and equipment, Cash Equivalents, etc.) or not, the financial reports provide information about the liquidation value of the entity. The liquidation value is the estimated value expected to be received when the physical assets of the entity are sold out in the market usually less than the fair market value due to instant sales to pay off the obligations and debts of the entity.