FASB CONCEPTUAL FRAMEWORK
EXPENSE RECOGNITION
LETS THE EXPENSE FOLLOW THE REVENUES
MONETARY UNIT
MONEY IS THE COMMON DENOMINATOR
FREE FROM ERROR
MORE ACCURATE (FAITHFUL) REPRESENTATION OF A FINANCIAL ITEM
CONFIRMATORY VALUE
RELEVANT INFORMATION ALSO HELPS USERS CONFIRM OR CORRECT PRIOR EXPECTIONS
PREDICTIVE VALUE
RELEVANT INFORMATION IS USED BY INVESTORS TO FORM THEIR OWN EXPECTATIONS ABOUT THE FUTURE
ENHANCING QUALITIES
-COMPARABILITY -VERIFIABILITY -TIMELINES -UNDERSTANDABILITY
CONSTRAINTS
-COST CONSTRAINTS -INDUSTRY PRACTICE
ASSUMPTIONS
-ECONOMIC ENTITY -GOING CONCERN -MONETARY UNIT -PERIODICITY
PRINCIPLES
-MEASUREMENT -REVENUE RECOGNITION -EXPENSES RECOGNITION -FULL DISCLOSURE
FASB CONCEPTUAL FRAMEWORK
-OBJECTIVES -QUALITATIVE CHARACTERISTICS -ELEMENTS -ASSUMPTIONS -PRINCIPLES -CONSTRAINTS
FUNDAMENTAL QUALITIES
-RELEVANCE -FAITHFUL REPRESENTATION
MEASUREMENT PRINCIPLE
THE MOST COMMONLY USED MEASUREMENTS ARE BASED ON HISTORICAL COST AND FAIR VALUE
FAITHFUL REPRESENTATION
THE NUMBERS AND DESCRIPTIONS MATCH WHAT ACTUALLY EXISTED OR HAPPENED -COMPLETENESS -NEUTRALITY -FREE FROM ERROR
UNDERSTANDABILITY
THE QUALITY OF INFORMATION THAT LETS REASONABLY INFORMED USERS SEE ITS SIGNIFICANCE
INDUSTRY PRACTICE
THE UNIQUE NATURE OF SOME INDUSTRIES AND BUSINESS CONCERNS SOMETIMES REQUIRES DEPARTURE FROM BASIC ACCOUNTING THEORY
OBJECTIVE
*LEVEL 1 -TO PROVIDE INFORMATION THAT IS USEFUL TO PRESENT AND POTENTIAL EQUITY INVESTORS, LENDERS, CREDITORS IS THEIR CAPACITY AS CAPITAL PROVIDERS
ELEMENTS
*LEVEL 2 -ASSETS -LIABILITIES -EQUITY -INVESTMENTS BY OWNERS -DISTRIBUTIONS TO OWNERS -COMPREHENSIVE INCOME -REVENUES -EXPENSES -GAINS AND LOSSES
QUALITATIVE CHARACTERRISTICS
*LEVEL 2 -FUNDAMENTAL QUALITIES -ENHANCING QUALITIES
NEUTRALITY
A COMPANY CANNOT SELECT INFORMATION TO FAVOR ONE SET OF INTERESTED PARTES OVER ANOTHER
COMPLETENESS
ALL THE INFORMATION THAT IS NECESSARY FOR FAITHFUL REPRESENTATION IS PROVIDED
PERIODICITY
COMPANY CAN DIVIDE ITS ECONOMIC ACTIVITIES INTO TIME PERIODS
ECONOMIC ENTITY
COMPANY KEEPS ITS ACTIVITY SEPARATE FROM ITS OWNERS AND OTHER BUSINESSES
GOING CONCERN
COMPANY TO LAST LONG ENOUGH TO FULFILL OBJECTIVES AND COMMITMENTS
COST CONSTRAINT
COST OF PROVIDING INFORMATION MUST BE WEIGHED AGAINST THE BENEFITS THAT CAN DERIVED FROM USING IT
REVENUE RECOGNITION
GENERALLY OCCURS WHEN REALIZED OR REALIZABLE AND WHEN EARNED
TIMELINESS
HAVING INFORMATION AVAILABLE TO DECISION-MAKERS BEFORE IT LOSES ITS CAPACITY TO INFLUENCE DECISIONS
RELEVANCE
INFORMATION IS HELPFUL IN MAKING DECISIONS -PREDICTIVE VALUE -CONFIRMATORY VALUE -MATERIALITY
MATERIALITY
INFORMATION IS MATERIAL IF OMITTING IT OR MISSTATING IT COULD INFLUENCE DECISIONS THAT USERS MAKE ON THE BASIS OF THE REPORTED FINANCIAL INFORMATION
COMPARABILITY
INFORMATION THAT IS MEASURED AND REPORTED IN A SIMILAR MANNER FOR DIFFERENT COMPANIES IS CONSIDERED COMPARABLE
VERIFIABILITY
OCCURS WHEN INDEPENDENT MEASURERS, USING THE SAME METHODS, OBTAIN SIMILAR RESULTS
FULL DISCLOSURE
PROVIDING INFORMATION THAT IS OF SUFFICIENT IMPORTANCE TO INFLUENCE THE JUDGMENT AND DECISIONS OF AN INFORMED USER -FINANCIAL STATEMENTS -NOTES TO THE FINANCIAL STATEMENTS -SUPPLEMENTARY INFORMATION