Conceptual framework

The Board will be guided by the __________ in the development of future IFRSs and in its review of existing IFRSs

Conceptual Framework

Conceptual Framework prevails over IFRS T/F?

F

Financial reports are based on exact depictions

F, To a large extent, financial reports are based on estimates, judgements and models rather than exact depictions.

regulators and the public are primary users of financial report T/F?

F, only investors, creditors and lenders

management rely on general purpose financial reports T/F?

F. It does not because it is able to generate info internally

fundamental chars.

FRM faith representation, relevance, materiality

Scopes of Conceptual Framework

(a) the objective of financial reporting; (b) the qualitative characteristics of useful financial information; (c) the definition, recognition and measurement of the elements from which financial statements are constructed; and (d) concepts of capital and capital maintenance.

Purposes of Conceptual Framework

(a) to assist the Board in the development of future IFRSs and in its review of existing IFRSs; (b) to assist the Board in promoting harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRSs; (c) to assist national standard-setting bodies in developing national standards; (d) to assist preparers of financial statements in applying IFRSs and in dealing with topics that have yet to form the subject of an IFRS; (e) to assist auditors in forming an opinion on whether financial statements comply with IFRSs; (f) to assist users of financial statements in interpreting the information contained in financial statements prepared in compliance with IFRSs; and (g) to provide those who are interested in the work of the IASB with information about its approach to the formulation of IFRSs.

QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION (give 2 types)

enhancing and fundamental

general purpose FS provides info about_____

financial position of a reporting entity and the claims against the reporting entity.

Conceptual framework deals with ______ financial reports

general purpose

information needed by the external users

info about resources of entity and how effectively the entity's management and governing board

Changes in economic resources and claims not resulting from financial performance. Give example.

issuing additional shares

decisions by investors, lenders, creditors expectations returns depend

on their assessment of the amount, timing and uncertainty of net cash inflows

Financial statements are most commonly prepared in accordance with an accounting model based on ______ and the _________.

recoverable historical cost and the nominal financial capital maintenance concept.

it forms the foundation of the conceptual framework

the objective of general purpose financial reporting

decisions by investors depends on

the returns that they expect form an investment (e.g. dividends, principal and interest payments)

The objective of general purpose financial reporting is

to provide financial information about the reporting entity that is useful to existing and potential INVESTORS, LENDERS and other CREDITORS in making decisions about providing resources to the entity.

Financial reports also provide information about the effects of transactions and other events that change a reporting entity's economic resources and claims.

T

General purpose financial reports are not designed to show the value of a reporting entity; but they provide information to help existing and potential investors, lenders and other creditors to estimate the value of the reporting entity. T/f?

T

Nothing in this Conceptual Framework overrides any specific IFRS. T/F?

T

Enhancing chars

VCUT Verifiability comparability understandability timeliness

International Accounting Standards Board

committed to narrowing differences by seeking to harmonise regulations, accounting standards and procedures relating to the preparation and presentation of fs.

It depicts the effects of transactions and other events and circumstances on a reporting entity's economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period.

Accrual Accounting

International Accounting Standards Board

It believes that further harmonization can best be pursued by focusing on financial statements that are prepared for the purpose of providing information that is useful in making economic decisions.

Major users' economic decisions

Note: PIBREAST- PROFITS, INCOME, BENEFITS, REGULATE, EQUITY INVESTMENT, ACCOUNTABILITY, SECURITY, TAXATION (a) to decide when to buy, hold or sell an equity investment. (b) to assess the stewardship or accountability of management. (c) to assess the ability of the entity to pay and provide other benefits to its employees. (d) to assess the security for amounts lent to the entity. (e) to determine taxation policies. (f) to determine distributable profits and dividends. (g) to prepare and use national income statistics. (h) to regulate the activities of entities.