Current documentation: https://confluence.atlassian.com/jira/configuring-jira-options-185729544.html

When turned ON, you will no longer be able to create, edit or delete users/groups from within JIRA (or via email or import); but you can still assign users/groups to project roles, and create/edit/delete user properties. Additionally, JIRA will not display options for users to change their password, or edit their profile.

This behaviour was changed as of JIRA 5.0, as indicated by the comment here:

• https://jira.atlassian.com/browse/JRA-33471

  Currently the only purpose of the setting is to remove the "Forgot Password" link.

This means it will still be possible to create/edit/delete users/groups even though the option is turned ON. Hence, the documentation needs updating.