The contents of special-purpose financial reporting are typically determined by which factor?

The contents of special-purpose financial reporting are largely shaped by external requirements imposed by outside parties. This is because special-purpose reports are designed to address specific needs of stakeholders that might not be fulfilled by general-purpose financial statements. These stakeholders can include regulatory bodies, lenders, investors, or grant-making entities that have particular information needs or compliance demands.

For example, a governmental agency may require specific financial reporting formats or disclosures based on regulations relevant to funding or oversight. The focus on external requirements means that these reports can vary significantly depending on who the users are and what information they require, rather than adhering strictly to standardized accounting practices or management preferences.

This emphasis on the needs of external parties distinguishes special-purpose financial reporting from standard accounting practices or internal management decisions. While management may influence the reports, the driving force is often compliance with external mandates designed to ensure transparency and accountability to third-party stakeholders.