Professional Documents
Culture Documents
FRAMEWORK
Assist the IASB in the development of future IFRS and the review of existing IAS. Assist national standard-setting bodies in developing their own national standards. Assist preparers of financial statements in compliance with GAAP. Assist auditors in expressing opinion on the FS. Assist users in interpreting IFRS financial statements and with the issues not covered by standards. Assist others who are interested in the IFRSs.
Describes the objective and basic qualitative concepts underlying IFRS financial statements. Is the priority source for preparers or auditors seeking a standard or interpretation The FRAMEWORK is NOT * an IASB standard * a principle to be applied.
FRAMEWORK: SCOPE
The objective and elements of financial statements. Underlying assumptions and qualitative characteristics of financial reporting. Definition, recognition and measurement of the elements of financial statements: * assets and liabilities * income and expense The concepts of capital and capital maintenance
Produced at least annually For a wide range of external users who rely on the GPFSRs to meet their information needs. Primary users: investors Secondary users: lenders, suppliers or trade creditors, employees, customers, government and their agencies, the general public Information needs: include forecasting economic decisions and some non-financial information
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION: summarizes financial position INCOME STATEMENT: summarizes financial performance
STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOW NOTES & SUPPLEMENTARY SCHEDULES
Financial Position
Addresses assets owned, amounts owed, residual equity interest in net assets. Is affected by resources controlled, financial structure: liquidity, solvency and adaptability.
INCOME STATEMENT
Financial Performance
Summarizes the entitys ability to earn profit on the resources invested in it. Helps forecasting cash flows.
Summarizes financial position changes involving cash (and cash equivalents) flowing through its Operations Investments Financing
INVESTORS
CUSTOMERS
EMPLOYEES
PUBLIC
UNDERLYING ASSUMPTIONS
UNDERLYING ASSUMPTIONS
ACCRUAL
Determination of periodic income and financial position depends on measurement of assets and liabilities and changes in them as the changes occur rather than simply when cash is received or paid Framework recognizes when events occur, not when cash changes hands
GOING CONCERN
An accounting entity is viewed as continuing in operation in the absence of evidence to the contrary. Framework assumes cash flow from operations not from liquidation sales
UNDERLYING ASSUMPTIONS
Accounting Entity Time Period Measurement of economic resources and obligations Measurement in terms of money Exchange Price Approximation Judgment Materiality Substance over form General purpose financial statements
The Framework identifies four principal qualitative characteristics of financial statements: * Understandability * Relevance * Reliability * Comparability
UNDERSTANDABILITY
PREDICTIVE VALUE
RELEVANCE
FAITHFUL REPRESENTATION
RELIABILITY
COMPARABILITY
CONSTRAINTS: Timeliness Balance between benefits and costs Balance between qualitative objectives
UNDERSTANDABILITY
Involves assuming reasonable business / economic / accounting knowledge and diligent study of the information. back
RELEVANCE
Includes components of materiality and timeliness next
MATERIALITY
Information is material if the response or misstatment could influence the economic decisions of users. Immaterial information lacks relevance. Several IFRSs contain specific guidance on materiality. No overall quantitative measure.
TIMELINESS
Information must be provided to users within the time frame in which it is most likely to have on their decisions. back
RELIABILITY: includes
Faithful Representation- it is important to represent accurately the information. Substance over Form transactions should reflect the economic substance, rather than the legal form e.g. finance leases. Neutrality information must be decision neutral Prudence involves incorporating a degree of caution to ensure: * assets and revenues are not overstated * liabilities and expenses are not understated. Completeness disclosure of significant information needed for decision making and material errors corrected.
COMPARABILITY
Includes comparability over * time * different entities intercomparability * consistency, the enabling principle for comparability
Fair Presentation
Assets Liabilities Equity Income (includes revenues and gains) Expenses (includes operating expenses and losses)
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) ASSETS: controlled economic resources expected to provide future benefits. LIABILITIES: a present obligation requiring economic resources to settle. EQUITY: the residual interest in assets minus liabilities.
a present obligation of the entity arising from past events Settlement of which is expected to results in an outflow of resources embodying economic benefits.
EQUITY
Residual interest in the assets of the entity after deducting all its liabilities.
ASSETS
LIABILITY
When it is probable that When it is probable that future economic there will be an outflow benefits will flow to the of resources to settle entity, and the present obligation. When cost or value of When the outflow can the asset can be reliably be reliably measured. measured.
EXCEPTION: executory contracts EXCEPTIO
INCOME Increases in economic benefits during the accounting period * direct inflows * enhancement of an asset
EXPENSES
Decreases in economic benefits during the accounting period * direct outflows * disposition of assets * increases in liabilities * incurrence of liabilities Result in increases in Result in decreases in equity other than those equity other than those relating to contributions relating to distributions from equity participants to equity participants.
INCOME When an increase in future economic benefits can be reliably measured Recognition occurs simultaneously with recognition of an increase in an asset or a decrease in a liability.
EXPENSES When a decrease in future economic benefits can be reliably measured. Recognition occurs simultaneously with recognition of an increase in a liability or a decrease in asset.
Matching concept
MEASUREMENT BASES
The Framework is an aid to drafting new or revised IFRSs, PFRSs or PASs. The Framework is a point of reference for preparers, auditors, and or users of financial statements regarding preparation, audit, and understanding the financial statements. The Framework is a key point of reference for preparers of FS in the absence of specific guidance. IFRSs / PFRSs should be accounted for in accordance with their substance, rather than only their legal form. Transactions with shareholders shsould be considered carefully in determining the appropriate accounting standard.
REFERENCE
Retooling seminar materials sponsored by UE in 2008 Guest Speaker: Dean Ester Ledesma ALCALA. LEDESMA.LUPISAN