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Chapter2-1
C H A P T E R 2
CONCEPTUAL FRAMEWORK FOR
FINANCIAL REPORTING
Intermediate Accounting
IFRS Edition
Presented by;
Ratna candra sari
Email:[email protected]
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Chapter2-2
1. Describe the usefulness of a conceptual framework.
2. Describe efforts to construct a conceptual framework.
3. Understand the objective of financial reporting.
4. Identify the qualitative characteristics of accounting information.
5. Define the basic elements of financial statements.
6. Describe the basic assumptions of accounting.
7. Explain the application of the basic principles of accounting.
8. Describe the impact that constraints have on reporting
accounting information.
Learning Objectives
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Chapter2-3
Need for a Conceptual Framework
Rule-making should build on and relate to an
established body of concepts.
Enables IASB to issue more useful and consistentpronouncements over time.
Conceptual Framework
LO 1 Describe the usefulness of a conceptual framework.
Conceptual Framework establishes the concepts
that underlie financial reporting.
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Chapter2-4
LO 2 Describe efforts to constructa conceptual framework.
ASSUMPTIONS
1. Economic entity
2. Going concern3. Monetary unit
4. Periodicity
5. Accrual
PRINCIPLES
1. Measurement
2. Revenue recognition3. Expense recognition
4. Full disclosure
CONSTRAINTS
1. Cost
2. Materiality
OBJECTIVEProvide information
about the reportingentity that is useful
to present and potentialequity investors,
lenders, and othercreditors in their
capacity as capitalProviders.
ELEMENTS
1. Assets
2. Liabilities
3. Equity
4. Income5. Expenses
Illustration 2-7Framework for FinancialReporting
First level
Second level
Thirdlevel
QUALITATIVECHARACTERISTICS
1. Fundamentalqualities
2. Enhancing
qualities
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Chapter2-5
“To provide financial information about the reporting entity
that is useful to present and potential equity investors,
lenders, and other creditors in making decisions in their
capacity as capital providers.”
First Level: Basic Objective
LO 3 Understand the objectives of financial reporting.
OBJECTIVE
Provided by issuing general-purpose financial statements.
Assumption is that users have reasonable knowledge of business
and financial accounting matters to understand the information.
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Chapter2-6
IASB identified the Qualitative Characteristics of
accounting information that distinguish better (more
useful) information from inferior (less useful)
information for decision-making purposes.
Second Level: Fundamental Concepts
LO 4 Identify the qualitative characteristics of accounting information.
Qualitative Characteristics of Accounting
Information
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Chapter2-7
Fundamental Quality - Relevance
Relevance is one of the two fundamental qualities that makeaccounting information useful for decision-making.
Second Level: Fundamental Concepts
LO 4 Identify the qualitative characteristics of accounting information.
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Chapter2-8
Fundamental Quality – Faithful Representation
Faithful representation means that the numbers anddescriptions match what really existed or happened.
Second Level: Fundamental Concepts
LO 4 Identify the qualitative characteristics of accounting information.
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Chapter2-9
Enhancing Qualities
Distinguish more-useful information from less-usefulinformation.
Second Level: Fundamental Concepts
LO 4 Identify the qualitative characteristics of accounting information.
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Chapter2-10
ASSUMPTIONS
1. Economic entity
2. Going concern3. Monetary unit
4. Periodicity
5. Accrual
PRINCIPLES
1. Measurement
2. Revenue recognition3. Expense recognition
4. Full disclosure
CONSTRAINTS
1. Cost
2. Materiality
OBJECTIVEProvide information
about the reportingentity that is usefulto present and potential
equity investors,lenders, and othercreditors in their
capacity as capitalProviders.
ELEMENTS
1. Assets
2. Liabilities
3. Equity
4. Income5. Expenses
Illustration 2-7Framework for FinancialReporting
First level
Second level
Thirdlevel
QUALITATIVECHARACTERISTICS
1. Fundamentalqualities
2. Enhancing
qualities
Basic Elements
LO 4
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Chapter2-11
Second Level: Basic Elements
LO 5 Define the basic elements of financial statements.
