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Conceptual Framework

This document summarizes the key concepts from the conceptual framework. It discusses the objectives of general purpose financial reporting which are to provide useful information about an entity's financial position, performance, and cash flows. The framework outlines underlying assumptions, qualitative characteristics, elements of financial statements, and criteria for recognition and measurement. It describes the statement of financial position, statement of comprehensive income, and other primary financial statements. The conceptual framework provides the foundation for the IASB to develop accounting standards in a consistent manner and for financial reports to present a true and fair view.

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Kelvin Maseko
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124 views

Conceptual Framework

This document summarizes the key concepts from the conceptual framework. It discusses the objectives of general purpose financial reporting which are to provide useful information about an entity's financial position, performance, and cash flows. The framework outlines underlying assumptions, qualitative characteristics, elements of financial statements, and criteria for recognition and measurement. It describes the statement of financial position, statement of comprehensive income, and other primary financial statements. The conceptual framework provides the foundation for the IASB to develop accounting standards in a consistent manner and for financial reports to present a true and fair view.

Uploaded by

Kelvin Maseko
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CH 1

THE
CONCEPTUAL
FRAMEWORK

Conceptual framework
IASBS Framework
Objective of financial
statements
Underlying Assumptions
Qualitative characteristics of f/s
Recognition of elements of f/s
Elements of f/s
Recognition of elements of f/s
Measurement of elements of f/s
Fair presentation and
compliance with IFRS

1. The conceptual framework


Definition:AAstatement
statementofofgenerally
generally
Definition:
acceptedtheoretical
theoreticalprinciples
principleswhich
which
accepted
formthe
theFRAME
FRAMEofofreference
referencefor
for
form
financialreporting.
reporting.
financial

Advantages of the framework


There is uniform development of
accounting standards
Standards based on the framework
are less open to criticism.
Standards touch on all areas of the
financial statements

Disadvantages
No single conceptual framework can
suit all users.
There may be a need for a variety of
accounting standards, each produced
for a different purpose.
There is no evidence that the presence
of a framework makes standard
preparation and implementation easy.

Generally Accepted Accounting


Principles (GAAP)
GAAP are all accounting rules
May include:
Company law of the country
Accounting Standards of a country
Exchange control requirements of a
country
IASs/IFRSs
Statutory requirements in other
countries

2.0 Chapters/Sections of the


Framework
Objectives of general purpose financial
reporting
The reporting entity
Qualitative characteristics of financial
information
Underlying assumptions
Elements/make up of financial statements
Recognition of elements of f/s
Measurement of the elements of f/s
Concepts of capital and capital maintenance

3.0 OBJECTIVES OF THE FINANCIAL


STATEMENTS
to provide information about the
financial position, financial
performance and changes in financial
performance of an entity useful
to a wide rage of users. The framework.

3.1 Information in f/s is restricted:


It is based on history, not on future
events.
Does not contain non-financial
information

4.0 Underlying Assumptions


Two of them:
Accruals basis
Going Concern

5. Qualitative characteristics of f/s


Two:
Relevance
Faithful representation

5.1: Faithful representation


Financial information should faithfully
represent the information they
purport to represent.

5.2: Relevance
Should be relevant to the users, ie,
should help users evaluate past,
present or future events.

Qualitative characteristics
of F/S

Comparability
Verifiability
Timeliness
Understandability

Elements of financial statements


Two mentioned by the Framework:
Statement of financial position and
Statement of comprehensive income
But there are three more

Elements of financial statements


continued
Statement of changes in equity
Statement of cash flows
Accounting policies and notes.

Statement of financial
position
Made up of three parts:
Assets: Resources of an entity as a result of
past events
Liabilities: Obligations of an entity as a
result of past events.
Equity: Residue interest in the assets
after deducting all liabilities.

Statement of comprehensive
income
Income
Expenses

Income/Expenses
Increases in economic benefits
during the accounting period in form of
inflows.

Decreases in economic benefits


during the accounting period in form of
outflows

7.0 Recognition of the elements of


financial statements
Probability of future economic benefit
Reliability of measurement
Assets which cannot be recognised

MEASUREMENT OF THE
ELEMENTS
Historical cost
Current cost
Realisable (settlement) value
Present value

FAIR PRESENTATION AND


COMPLIANCE WITH IFRSs
.f/s should present fairly the
position, performance and cash flow
of an entity
IAS 1
Compliance with IFRS should be disclosed
All relevant IFRSs must be followed
Use of inappropriate accounting treatment
cannot be rectified by notes or disclosure.

Where an IFRS has been


departed:
Management should confirm that the
f/s show a true and fair view
Statement that except for the
particular IFRS, all IFRSs have been
followed
Why the particular IFRS is misleading
Financial impact.

?
Questions?

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