Various people – your employees, your suppliers, customers and investors, use your financial statements. They all have different expectations when it comes to the level of information given and details it’s presented in. 

When one thing that’s important in determining what to enclose in more details and what not, is the level of “materiality”, i.e. which classes of items are material (considering the size and nature of the item), another measurement point is the knowledge of the users. Question answered is “How much do I have to explain?”

Normally users of financial statements are assumed to have a reasonable knowledge of business, economic activities and accounting. This means that you don’t have to explain something that’s general knowledge when it comes to accounting, business and economic activities. Obviously something that’s “general knowledge” means information, which applies to other, companies as well, i.e. meaning of receivables or some financial ratio. Your company specific considerations or terms used should still be explained or defined to outside users, like investors, suppliers and customers.

If you think about it, assuming that the users have some basic knowledge of the three things mentioned, it makes preparing the statements somewhat easier. You’re writing to users you determined as the focus group and it makes writing and even thinking about level of information to present a lot easier. So always define your audience first.