Notesale: Turn your study into money

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OnCeptUal

C

FRAMEWORK

Is the theoretical basis or set of concepts for general-purpose
financial reporting
...


Purpose

Authoritative Status

1
...

2
...

3
...
The Conceptual Framework is
not a Standard
...
Provides concepts and
guidance that underlie the
decisions of IASB when
developing Standards
...
Does not override any Standard
or any requirement in Standard
...

Annual periods beginning on or
after Jan
...


CHAPTER 1

The Objective of General-Purpose
Financial Reporting
To provide financial
information that is
useful to existing and
potential investors,
lenders and other
creditors (primary
users) in making
decisions relating to
providing resources
to the entity
PRIMARY USERS

USER'S DECISION INVOLVES ABOUT

Buying, selling or holding equity or debt
instrements
Providing or setting loans and other forms of
credit
Voting, or otherwise influencing management's
actions

USER'S ASSESSES INFORMATION ABOUT

Existing and potential investors
Lenders and other creditors

Prospects for future net cash inflows to the
entity
Management's stewardship of the entity's
economic resources

OTHER USERS
Entity's
management
Regulators
Public

}

They cannot demand
information directly from
the reporting entity and
they rely on generalpurpose financial reports
for their information
needs

GENERAL-PURPOSE FINANCIAL REPORTING

Provides information that suits the common needs of the primary
users

General-purpose financial reports do not and cannot provide all
the information needs of the primary users

General-purpose financial reports provide information about the
economic resources, claims, and changes of the entity

Economic Resource and Claims

Information about the nature and amounts of the entity's economic
resources (assets) and claims (liabilities and equity)
It will help users to identify the entity's financial strengths and
weaknesses
This information can help users in assessing the entity's:
Liquidity (ability to pay short-term liabilities)
Solvency (ability to pay long-term liabilities)
Needs for additional financing
Management's stewardship on the use of the economic resourcres

Changes of Economic Resource and Claims
Results from:
Financial performance (income and expenses)
Other events and transactions

CHAPTER 2

Qualitative Characteristics of
Useful Financial Information

- These are the attributes that identify the type of information
provided in financial reports that are most likely to be useful to
users for making decisions
...

It is preferable to achieve the best possible cost-benefit
ratio, with costs not outweighing benefits
...

RECOGNITION CRITERIA

An item is recognized if:
a
...
) Recognizing it would
provide useful information
(relevant and faithfully
represented information)

Is the elimination of a
previously recognized asset or
liability from the entity's
statement of financial position
...


CHAPTER 6

Measurement
- Elements recognized in financial statements are quantified in monetary
terms
...


HISTORICAL COST
MEASUREMENT
BASIS
- Price that gave
rise to item being
measured

Provides information derived, at least in part,
from the price of the transaction or other event
that resulted in the measurement of the item
...

The amortized cost method is one way to apply
a historical cost measurement basis to financial
assets and liabilities
...

Reflects market
participants' current
expectations about the
amount, timing and
uncertainty of future cash
flows

VALUE IN USE /
FULFILLMENT VALUE
Reflects entity-specific
current expectations
about the amount, timing
and uncertainty of future
cash flows

CURRENT VALUE
MEASUREMENT
BASIS

- Reflect conditions
at measurement
date

CURRENT COST

Reflects the current
amount that would be:
Paid to acquire an
equivalent asset
Received to take on
an equivalent liability

CHAPTER 7

Presentation and Disclosure
- Income and expenses are classified and included either:

STATEMENT OF PROFIT OR LOSS

The primary source of
information about an entity's
financial performance for the
reporting period
Profit or loss could be a section of
a single statement of financial
performance or a separate
statement
The statement of financial
performance includes a total or
subtotal for profit or loss
In principle, all income and
expenses are classified and
included in the statement of
profit or loss

OTHER COMPREHENSIVE INCOME

In extraordinary situations, the
Board may elect to exclude
income or expenses deriving
from a change in the current
value of an asset or liability from
the statement of profit or loss
and include them in other
comprehensive income
...


RECYCLING
Income and expenses included in OCI in one period are
recycled to P&L in a future period when doing so results
in more relevant information or faithful representation;
otherwise, no subsequently recycling of such items

CLASSIFICATION

Is the sorting of assets,
liabilities, equity, income
or expenses on the basis
of shared
characteristics for
presentation and
disclosure purposes
...


OFFSETTING

Occurs when an entity
recognizes and measures
both an asset and liability
as separate unit of
account, but groups
them into a single net
amount in the statement
of financial position

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