FASB CONCEPTUAL FRAMEWORK

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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


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