This is a comprehensive and detailed summary on Conceptual Framework and international accounting standard for financial accounting 2.
Essential!!
Precise!!
For you!!
THE CONCEPTUAL FRAMEWORK &
INTERNATIONAL ACCOUNTING STANDARD 1
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)
IFRSs are principles that are applied by accountants when they:
Record transactions and other financial information (bookkeeping) and
Prepare financial statements for external users (reporting).
IFRSs are issued by the International Accounting Standards Board (IASB). Its predecessor
was the International Accounting Standards Committee (IASC). Standards developed by
the IASC have the prefix IAS (for “International Accounting Standard”), while standards
developed by the IASB have the prefix IFRS. The standards developed by the “old” IASC
have been adopted by the “new” IASB.
IAS’s developed by the IASC: 41 in total but only 25 of them are still in use. (The others
were replaced by newly written IFRSs.) To date, the IASB has developed 17 new
standards.
Read more about the development of exposure drafts, standards, interpretations and
annual improvements in Gripping GAAP Chapter 1.
THE CONCEPTUAL FRAMEWORK (CF)
The Conceptual Framework (CF) is the foundation on which all IFRSs are built.
The Conceptual Framework for Financial Reporting:
States the “objectives” of general-purpose financial reporting, and
Explains the various “concepts” that underpin financial reporting.
The original CF was issued in 1989. During 2010, the 1989 CF was completely revised to
harmonise it amongst global stakeholders.
On 29 March 2018 the International Accounting Standards Board (IASB) published its
revised 'Conceptual Framework for Financial Reporting', which is the one currently in use.
Significant changes in the 2018 version are:
Revised definitions of an asset, a liability, an income and an expense;
Revised recognition criteria;
Improved guidance on measurement and recognition, derecognition, presentation
and disclosure.
The new Conceptual Framework does not constitute a substantial revision of the previous
version of the Conceptual Framework but instead the IASB focused on topics that were not
yet covered or that showed obvious shortcomings that needed to be addressed.
, 2
Why do we need a Conceptual Framework in accounting? (What is the purpose of the
Conceptual Framework?)
The CF is basically a tool that has three purposes: (Pg.35)
1. To help the IASB in developing IFRSs,
2. To help those preparers of financial statements who may need to create their own
accounting policies (when a suitable IFRS does not exist or an existing IFRS allows
an alternative policy) and
3. To help all parties to understand and interpret the IFRSs.
Concepts currently contained in the CF include the:
1. Objective of general-purpose financial reporting,
2. Qualitative characteristics of useful financial statements.
3. Financial statements and the Reporting entity.
4. Elements of financial statements (Assets, liabilities, equity, income expenses0
5. Recognition and derecognition.
6. Measurement bases that may be used when measuring the elements.
7. Presentation and Disclosure.
8. Capital and capital maintenance.
THE QUALITIVE CHARACTERISTICS AND CONSTRAINTS
For financial statements to be useful to its users, it must have certain qualitative
characteristics. The Conceptual Framework separates the qualitative characteristics into
the following two types:
(Refer to Gripping GAAP Pg. 44-47)
Fundamental qualitative characteristics
Those that are essential for financial information to be useful for users are:
Relevance
In order for information to be relevant, one should consider whether it could make a
difference in users’ decision-making.
Faithful representation
“Substance over form.”
In order to achieve faithful representation, the financial information given to users
must be complete, neutral and free from error.
Enhancing qualitative characteristics (Pg. 47-49)
Those that improve usefulness are:
Comparability
Verifiability
Timeliness
Understandability
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller anyiamgeorge19. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R233,24. You're not tied to anything after your purchase.
