FAC1502 Financial Accounting SUMMARY NOTES Revision course 2017 S1. The Conceptual Framework for Financial Reporting
Elements: Recognition Criteria
First meet the definition of one of the elements!
Then 2 recognition criteria:
1. Is PROBABLE that any FUTURE ECONOMIC BENEFITS will flow
...
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Study unit 1
STUDY UNIT 1
The Conceptual Framework for Financial Reporting
What is the Framework?
Sets out the objectives & concepts
Provides a theoretical background or general frame of reference
Purpose of the Framework:
Assist standard setting bodies;
Assist preparation of financial statements;
Assist auditors;
Assist other users of financial statements.
The Conceptual Framework for Financial Reporting
The Objective of general purpose financial reporting: 2010 Framework
Objective
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.
The Conceptual Framework for Financial Reporting
Qualitative characteristics
2010 Framework
FUNDAMENTAL
Relevance - makes a difference in the decisions made by users
Faithful representation – Complete, neutral, free from error
ENHANCING
Comparability – period to period and entity to entity
Verifiability – Different, knowledgeable, independent observers reach
consensus
Timeliness - Information available to decision makers in time to influence their
decisions
Understandability - Classifying, characterising and presenting information
clearly and concisely
The Conceptual Framework for Financial Reporting
Underlying assumptions
ACCRUAL BASIS
Effects of transactions & other events are recognised when they occur
(NOT when cash flows!).
Recorded in accounting records and reported in AFS of the periods to which
they relate.
GOING CONCERN
Financial statements normally prepared on the assumption that entity is, and
will continue to operate as a going concern into the foreseeable future.
Entity not expected to liquidate in next 12 months
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