Materi 3 Materi 3 Rerangka Konseptual IASB

Conceptual Framework
Conceptual Framework establishes the concepts
that underlie financial reporting.
Need for a Conceptual Framework

Rule-making should build on and relate to an established body of concepts.
Enables IASB to issue more useful and consistent pronouncements over time.
Chapter 2-1
LO 1 Describe the usefulness of a conceptual framework.
Development of a Conceptual Framework
IASB and FASB are working on a joint project to develop a common conceptual framework Framework will build on existing IASB and FASB frameworks. Project has identified the objective of financial reporting (Chapter 1) and the qualitative characteristics of decision-useful financial reporting information.
Chapter 2-2
LO 2 Describe efforts to construct a conceptual framework.
Overview of the Conceptual Framework
Three levels:
First Level = Basic objective Second Level = Qualitative characteristics and
elements of financial statements

Third Level = Recognition, measurement, and disclosure concepts
Chapter 2-3
ASSUMPTIONS 1. Economic entity 2. Going concern 3. Monetary unit 4. Periodicity 5. Accrual
PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition 4. Full disclosure
CONSTRAINTS 1. Cost 2. Materiality
Third level
QUALITATIVE CHARACTERISTICS 1. Fundamental qualities 2. Enhancing qualities Illustration 2-7 Framework for Financial Reporting
ELEMENTS 1. 2. 3. 4. 5. Assets Liabilities Equity Income Expenses
Second level
Chapter 2-4
OBJECTIVE Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in their capacity as capital Providers.
First level
First Level: Basic Objective

OBJECTIVE
To provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers.
Provided by issuing general-purpose financial statements.
Assumption is that users have reasonable knowledge of business and financial accounting matters to understand the information.
Chapter 2-5
LO 3 Understand the objectives of financial reporting.
Second Level: Fundamental Concepts

Qualitative Characteristics of Accounting Information
IASB identified the Qualitative Characteristics of accounting information that distinguish better (more useful) information from inferior (less useful) information for decision-making purposes.
Chapter 2-6
LO 4 Identify the qualitative characteristics of accounting information.
Illustration 2-2 Hierarchy of Accounting Qualities
Chapter 2-7

Fundamental Quality - Relevance
Relevance is one of the two fundamental qualities that make accounting information useful for decision-making.
Chapter 2-8

Fundamental Quality Faithful Representation
Faithful representation means that the numbers and descriptions match what really existed or happened.
Chapter 2-9

Enhancing Qualities
Distinguish more-useful information from less-useful information.
Chapter 2-10
PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition
Basicdisclosure Elements 4. Full

ELEMENTS 1. 2. 3. 4. 5. Assets Liabilities Equity Income Expenses
Third level
QUALITATIVE CHARACTERISTICS 1. Fundamental qualities 2. Enhancing qualities Illustration 2-7 Framework for Financial Reporting
Second level
Chapter 2-11
OBJECTIVE Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in their capacity as capital Providers.
First level
LO 4
Second Level: Basic Elements
Chapter 2-12
LO 5 Define the basic elements of financial statements.
Third Level: Recognition, Measurement, and Disclosure Concepts

These concepts explain how companies should recognize, measure, and report financial elements and events.
Recognition, Measurement, and Disclosure Concepts
Illustration 2-7 Framework for Financial Reporting Chapter 2-13
PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition 4. Full disclosure
LO 6 Describe the basic assumptions of accounting.
Third Level: Assumptions

Basic Assumptions
Economic Entity company keeps its activity separate from its owners and other business unit. Going Concern - company to last long enough to fulfill objectives and commitments. Monetary Unit - money is the common denominator. Periodicity - company can divide its economic activities into time periods. Accrual Basis of Accounting transactions are recorded in the periods in which the events occur.
Chapter 2-14
LO 6 Describe the basic assumptions of accounting.
Third Level: Principles

Principles
Measurement
Cost is generally thought to be a faithful representation of the amount paid for a given item. Fair value is the amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arms length transaction. IASB has taken the step of giving companies the option to use fair value as the basis for measurement of financial assets and financial liabilities.
Chapter 2-15
LO 7 Explain the application of the basic principles of accounting.

Revenue Recognition - revenue is to be recognized when it
is probable that future economic benefits will flow to the company and reliable measurement of the amount of revenue is possible.
Illustration 2-3 Timing of Revenue Recognition
Chapter 2-16

Expense Recognition - outflows or using up of assets
or incurring of liabilities (or a combination of both) during a period as a result of delivering or producing goods and/or rendering services.
Illustration 2-4 Expense Recognition
Let the expense follow the revenues.

Chapter 2-17

Full Disclosure providing information that is of sufficient
importance to influence the judgment and decisions of an informed user.
Provided through:
Financial Statements Notes to the Financial Statements Supplementary information
Chapter 2-18
Third Level: Constraints

Constraints
Cost the cost of providing the information must be weighed
against the benefits that can be derived from using it.
Materiality - an item is material if its inclusion or omission

would influence or change the judgment of a reasonable person.
Chapter 2-19
LO 8 Describe the impact that constraints have on reporting accounting information.
Summary of the Structure
Chapter 2-20

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Conceptual Framework

Conceptual Framework establishes the concepts

that underlie financial reporting.

Need for a Conceptual Framework

LO 1 Describe the usefulness of a conceptual framework.

LO 2 Describe efforts to construct a conceptual framework.

elements of financial statements

LO 2 Describe efforts to construct a conceptual framework.

ASSUMPTIONS 1. Economic entity 2. Going concern 3. Monetary unit 4. Periodicity 5. Accrual

PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition 4. Full disclosure

CONSTRAINTS 1. Cost 2. Materiality

ELEMENTS 1. 2. 3. 4. 5. Assets Liabilities Equity Income Expenses

LO 2 Describe efforts to construct a conceptual framework.

First Level: Basic Objective

LO 3 Understand the objectives of financial reporting.

Second Level: Fundamental Concepts

LO 4 Identify the qualitative characteristics of accounting information.

Second Level: Fundamental Concepts

Illustration 2-2 Hierarchy of Accounting Qualities

LO 4 Identify the qualitative characteristics of accounting information.

Second Level: Fundamental Concepts

LO 4 Identify the qualitative characteristics of accounting information.

Second Level: Fundamental Concepts

LO 4 Identify the qualitative characteristics of accounting information.

Second Level: Fundamental Concepts

LO 4 Identify the qualitative characteristics of accounting information.

ASSUMPTIONS 1. Economic entity 2. Going concern 3. Monetary unit 4. Periodicity 5. Accrual

PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition

CONSTRAINTS 1. Cost 2. Materiality

Basicdisclosure Elements 4. Full

Second Level: Basic Elements

LO 5 Define the basic elements of financial statements.

Third Level: Recognition, Measurement, and Disclosure Concepts

PRINCIPLES 1. Measurement 2. Revenue recognition 3. Expense recognition 4. Full disclosure

CONSTRAINTS 1. Cost 2. Materiality

LO 6 Describe the basic assumptions of accounting.

Third Level: Assumptions

LO 6 Describe the basic assumptions of accounting.

Third Level: Principles

LO 7 Explain the application of the basic principles of accounting.

Third Level: Principles

LO 7 Explain the application of the basic principles of accounting.

Third Level: Principles

Illustration 2-4 Expense Recognition

Let the expense follow the revenues.

LO 7 Explain the application of the basic principles of accounting.

Third Level: Principles

LO 7 Explain the application of the basic principles of accounting.

Third Level: Constraints

Materiality - an item is material if its inclusion or omission

LO 8 Describe the impact that constraints have on reporting accounting information.

Summary of the Structure

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