The Financial Reporting Framework PPT.pptx

The Financial Reporting Framework

1. The Financial Reporting Framework --

2. The meaning of Conceptual Framework System of concepts and principles that underpin the preparation of financial statements. These concepts and principles should be consistent with one another. Recently, the term ‘conceptual framework’ has come to mean not only the principles themselves, but a document or statement that sets out and explains the concepts and principles that support the preparation of financial statements. A conceptual framework is developed for a particular regulatory system or a particular set of ‘generally accepted accounting principles’ or GAAP.

3. The Purpose of Conceptual Framework Rulemaking must be based on and linked to a clear concept in order to be used as a basis for the IASB to issue rules over time. IASB Frameworks cover the following topics: - The objective of financial statements - Underlying assumptions of financial statements - Qualitative characteristics of financial statements - The elements of financial statements - Recognition of the elements of financial statements - Measurement of the elements of financial statements - Concepts of capital and capital maintenance.

4. The cause of Conceptual Framework Lack of a formal framework Inconsistent with each other or with legislation. accounting standards fail to address important issues. The business environment is becoming increasingly complex. accounting standards cant cover all possible transactions.

5. Framework for financial Reporting

6. IASB:

7. First Level: Objective Provide financial information that can be used by potential investors, leaders and other creditors to make decisions in their capacity as providers of capital.

8. Second Level: Characteristics identify the characteristics of accounting information that are more useful with information that is less useful for decision making.

9. Second Level: Elements Directly related to the measurement of financial position. 1. Asset Resource controlled by the entity as a result of past events and future economic benefits are expected. 2. Liability Present obligation from pas events, the settlement of which is expected to result in an outflow 3. Equity Residual Interest in the asset after deducting all the liabilities. 4. Income Increase in economic benefits in the form of inflows or decreases of liabilities that increases in equity. 5. Expenses Decrease in economic benefits in the form of outflows or increases of liabilities that decreases in equity.

10. Third Level: Recognition, Measurement, Disclosure The IASB Framework states that an element (asset, liability, equity, income or expense) should be recognised in the statement of financial position or in profit and loss (the income statement) when it: meets the definition of an element satisfies certain criteria for recognition. The criteria for recognition are as follows: It must be probable that the future economic benefit associated with the item will flow either into or out of the entity. The item should have a cost or value that can be measured reliably.

11. Thank You