ch02 - Akuntansi Intermediete Kieso

8/16/2019 ch02 - Akuntansi Intermediete Kieso

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PREVIEW OF CHAPTER

Intermediate AccountingIFRS 2nd Edition

Kieso, Weygandt, and Warfield

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1. Describe the usefulness of aconce tual fra!e"or#.

2. Describe efforts to construct a conceptualframe or!.

". #nderstand t$e ob%ecti&e of financialreporting.

'. Identify t$e (ualitati&e c$aracteristics ofaccounting information.

). Define t$e basic elements of financialstatements.

*. Describe t$e basic assumptions ofaccounting.

+. E plain t$e application of t$e basic principlesof accounting.

-. Describe t$e impact t$at t$e cost constraint$as on reporting accounting information .

After studying this chapter, you should be able to:

Conce tual Fra!e"or#

for Financial Re ortin$2%EAR&I&' O()ECTIVE*

%EAR&I&' O()ECTIVE*


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&ee+ for a Conce tual Fra!e"or#► Rule ma!ing s$ould build on and relate to an establis$ed

body of concepts.

► Enables IAS/ to issue !ore useful an+ consistentronounce!ents o,er ti!e .

Conce tual Fra!e"or# establis$es t$e concepts t$atunderlie financial reporting.

LO 1

CO&CEPT-A% FRA EWOR/CO&CEPT-A% FRA EWOR/


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0$e need for a conceptual frame or! is $ig$lig$ted by accounting scandals

suc$ as t$ose at Royal A$old 1 3D4, Enron 1#SA4, and Satyan 5omputerSer&ices 1I D4. 0o restore public confidence in t$e financial reporting process,many $a&e argued t$at regulators s$ould mo&e to ard principles based rules.0$ey belie&e t$at companies e ploited t$e detailed pro&isions in rules basedpronouncements to manage accounting reports, rat$er t$an report t$e

economic substance of transactions. For e ample, many of t$e off6balances$eet arrangements of Enron a&oided transparent reporting by barely ac$ie&ing" percent outside e(uity o ners$ip, a re(uirement in an obscure accountingrule interpretation. Enron7s financial engineers ere able to structuretransactions to ac$ie&e a desired accounting treatment, e&en if t$at accountingtreatment did not reflect t$e transaction7s true nature. #nder principles basedrules, $opefully top management7s financial reporting focus ill s$ift fromdemonstrating compliance it$ rules to demonstrating t$at a company $asattained financial reporting ob%ecti&es.

WHAT’S YO ! "!#$%#"L&'

LO 1


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8. Describe t$e usefulness of a conceptualframe or!.

2. Describe efforts to construct aconce tual fra!e"or#.






-. Describe t$e impact t$at t$e cost constraint$as on reporting accounting information.



for Financial Re ortin$2%EAR&I&' O()ECTIVE*

%EAR&I&' O()ECTIVE*


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De,elo !ent of a Conce tual Fra!e"or#


9resently, t$e 5onceptual Frame or! is comprises of t$e follo ing.

: 5$apter 8; 0$e


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Three le,els0O,er,ie" of the Conce tual Fra!e"or#


First %e,el B ualitati&e 5$aracteristics andElements of Financial Statements

Thir+ %e,el B Recognition, easurement, and

Disclosure 5oncepts.

LO (


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A**- PTIO&*

8. Economic entity

2. =oing concern

". onetary unit

'. 9eriodicity). Accrual

PRI&CIP%E*

8. easurement

2. Re&enue recognition

". E pense recognition

'. Full disclosure

CO&*TRAI&T*

8. 5ost

O()ECTIVE9ro&ide informationabout t$e reportingentity t$at is useful

to present and potentiale(uity in&estors,

lenders, and ot$ercreditors in t$eir

capacity as capital

pro&iders.

E%E E&T*

8. Assets

2. 3iabilities". E(uity'. Income). E penses

I%%-*TRATIO& 2 5onceptual Frame or!for Financial Reporting

First le,el0$e C $yC?purpose

of accounting

*econ+ le,el/ridge bet eenle&els 8 and "

Thir+ le,el0$e C$o C?

implementation

3-A%ITATIVECHARACTERI*TIC*

8. Fundamental

(ualities2. En$ancing

(ualities


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4. -n+erstan+ the ob5ecti,e of financialre ortin$.

'. Identify t$e (ualitati&e c$aracteristics ofaccounting information .







for Financial Re ortin$2%EAR&I&' O()ECTIVE*%EAR&I&' O()ECTIVE*


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0o pro&ide financial information about t$e reporting entityt$at is useful to resent an+ otential e6uit7 in,estors8

len+ers8 an+ other cre+itors in ma!ing decisions aboutpro&iding resources to t$e entity.

FIR*T %EVE%0 (A*IC O()ECTIVEFIR*T %EVE%0 (A*IC O()ECTIVE

LO )

O()ECTIVE

9ro&ided by issuing general purpose financial statements.

Assumption is t$at users need reasonable !no ledge of businessand financial accounting matters to understand t$e information.


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9. I+entif7 the 6ualitati,e characteristicsof accountin$ infor!ation.









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IAS/ identified t$e 3ualitati,e Characteristics of

accounting information t$at distinguis$ better 1more useful4information from inferior 1less useful4 information for

decision ma!ing purposes.

*ECO&D %EVE%0 F-&DA E&TA% CO&CEPT**ECO&D %EVE%0 F-&DA E&TA% CO&CEPT*

3ualitati,e Characteristics of Accountin$Infor!ation

LO *


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I%%-*TRATIO& 2 2 ierarc$y of Accounting

>ualities

*ECO&D %EVE%0 F-&DA E&TA% CO&CEPT**ECO&D %EVE%0 F-&DA E&TA% CO&CEPT*

LO *


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Rele,anceRele,ance

LO *


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Fun+a!ental 3ualit7:Rele,ance

0o be rele,ant , accounting information must be capable of !a#in$a +ifference in a +ecision .

*ECO&D %EVE%0 F-&DA E&TA% CO&CEPT*

LO *


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Financial information $as re+icti,e ,alue if it $as &alue as an input topredicti&e processes used by in&estors to form t$eir o n e pectations

about t$e future.



LO *


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Rele&ant information also $elps users confir! or correct priore pectations.



LO *


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Information is !aterial if omitting it or misstating it could influencedecisions t$at users ma!e on t$e basis of t$e reported financial

information.



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Faithful Re resentationFaithful Re resentation

LO *


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Fun+a!ental 3ualit7:Faithful Re resentation

Faithful re resentation means t$at t$e numbers and descriptionsmatc$ $at really e isted or $appened.


LO *


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Co! leteness means t$at all t$e information t$at is necessary forfait$ful representation is pro&ided.



LO *


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&eutralit7 means t$at a company cannot select information to fa&orone set of interested parties o&er anot$er.



LO *


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An information item t$at is free fro! error ill be a more accurate1fait$ful4 representation of a financial item.



LO *


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Enhancin$ 3ualities

Information t$at is measured and reported in a similar manner for

different companies is considered co! arable .


LO *


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Enhancin$ 3ualities

Verifiabilit7 occurs $en independent measurers, using t$e samemet$ods, obtain similar results.


LO *


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Enhancin$ 3ualities

Ti!eliness means $a&ing information a&ailable to decision ma!ersbefore it loses its capacity to influence decisions.


LO *


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Enhancin$ 3ualities

-n+erstan+abilit7 is t$e (uality of information t$at lets reasonablyinformed users see its significance.


LO *


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;. Define the basic ele!ents of financialstate!ents.








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(asic Ele!ents(asic Ele!ents

LO +


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A resource controlled by t$e entity as a

result of past e&ents and from $ic$

future economic benefits are e pected to

flo to t$e entity.

Ele!ents of Financial *tate!ents

Asset

*ECO&D %EVE%0 (A*IC E%E E&T*

%iabilit7

E6uit7

Inco!e

E< enses

LO +


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A present obligation of t$e entity arising

from past e&ents, t$e settlement of $ic$

is e pected to result in an outflo from t$eentity of resources embodying economic

benefits.


Asset


%iabilit7

E6uit7

Inco!e

E< enses

LO +


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0$e residual interest in t$e assets of t$e

entity after deducting all its liabilities.


Asset


%iabilit7

E6uit7

Inco!e

E< enses

LO +


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Increases in economic benefits during t$e

accounting period in t$e form of inflo s or

en$ancements of assets or decreases ofliabilities t$at result in increases in e(uity,

ot$er t$an t$ose relating to contributionsfrom e(uity participants.


Asset


%iabilit7

E6uit7

Inco!e

E< enses

LO +


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Decreases in economic benefits during t$e

accounting period in t$e form of outflo s

or depletions of assets or incurrences ofliabilities t$at result in decreases in e(uity,

ot$er t$an t$ose relating to distributions to

e(uity participants.


Asset


%iabilit7

E6uit7

Inco!e

E< enses

LO +


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Eualitati&e c$aracteristic beingdisplayed $en companies in t$esame industry are using t$e sameaccounting principles.

1b4 >uality of information t$at confirmsusers7 earlier e pectations.

1c4 Imperati&e for pro&iding comparisonsof a company from period to period.

1d4 Ignores t$e economic conse(uencesof a standard or rule.

CharacteristicsRele&ance

Fait$ful representation

9redicti&e &alue

5onfirmatory &alue

eutrality

ateriality

0imelinesserifiability

#nderstandability

5omparability

LO +



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E


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E


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=. Describe the basic assu! tions ofaccountin$.







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THIRD %EVE%0 RECO'&ITIO&8 EA*-RE E&T8A&D DI*C%O*-RE CO&CEPT*THIRD %EVE%0 RECO'&ITIO&8 EA*-RE E&T8A&D DI*C%O*-RE CO&CEPT*

0$ese concepts e plain $o companies s$ould recogniHe,measure, and report financial elements and e&ents.

A**- PTIO&*

8. Economic entity

2. =oing concern

". onetary unit

'. 9eriodicity). Accrual

PRI&CIP%E*

8. easurement

2. Re&enue recognition

". E pense recognition

'. Full disclosure

CO&*TRAI&T*

8. 5ost

Reco$nition8 easure!ent8 an+ Disclosure Conce ts

I%%-*TRATIO& 2Conce tual Fra!e"or# forFinancial Re ortin$

LO


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Econo!ic Entit7 6 company !eeps its acti&ity separate from itso ners and ot$er business unit.

'oin$ Concern company to last long enoug$ to fulfillob%ecti&es and commitments.

onetar7 -nit money is t$e common denominator.

Perio+icit7 company can di&ide its economic acti&ities intotime periods.

Accrual (asis of Accountin$ 6 transactions are recorded in t$eperiods in $ic$ t$e e&ents occur.

THIRD %EVE%0 A**- PTIO&*THIRD %EVE%0 A**- PTIO&*

(asic Assu! tions

LO


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(E2 >0 Identify $ic$ basic assu! tion of accounting is bestdescribed in eac$ item belo .

1a4 0$e economic acti&ities of Fe+E< Cor oration 1#SA4 are di&ided into 82 mont$ periods for t$epurpose of issuing annual reports.

?b@Total *.A . 1FRA4 does not ad%ust amounts in itsfinancial statements for t$e effects of inflation.

?c@(arcla7s 1=/R4 reports current and non currentclassifications in its statement of financial

position.1d4 0$e economic acti&ities of To#ai Rubber

In+ustries 1 9 4 and its subsidiaries aremerged for accounting and reporting purposes.

Perio+icit7

'oin$ Concern

onetar7-nit

Econo!icEntit7

THIRD %EVE%0 A**- PTIO&*THIRD %EVE%0 A**- PTIO&*

LO


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. E< lain the a lication of the basicrinci les of accountin$.






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easure!ent Princi lesHistorical Cost is generally t$oug$t to be a fait$fulrepresentation of t$e amount paid for a gi&en item.

Fair ,alue is defined as t$e price t$at ould be recei&ed tosell an asset or paid to transfer a liability in an orderly

transaction bet een mar!et participants at t$e measurementdate.J

IAS/ $as gi&en companies t$e option to use fair &alue as t$ebasis for measurement of financial assets and financialliabilities.

THIRD %EVE%0 (A*IC PRI&CIP%E*THIRD %EVE%0 (A*IC PRI&CIP%E*

LO -


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easure!ent Princi lesIAS/ establis$ed a fair ,alue hierarch7 t$at pro&ides insig$t intot$e priority of &aluation tec$ni(ues to use to determine fair &alue .


I%%-*TRATIO& 2 9

LO -


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Re,enue Reco$nitionW$en a company agrees to perform a ser&ice or sell a product toa customer, it $as a performance obligation.

Re(uires t$at companies recogniHe re&enue in t$e accountingperiod in $ic$ t$e erfor!ance obli$ation is satisfied.


LO -


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I%%-*TRATIO& 2 ;0$e Fi&e Steps ofRe&enue Recognition

THIRD%EVE%0

(A*ICPRI&CIP%E*

Illustration0 Assumet$e Airbus 1DE#4 signsa contract to sellairplanes to (ritishAir"a7s 1=R/4 for 8LLmillion. 0o determine

$en to reco$ni e

re,enue , Airbus usest$e fi&e steps forre&enue recognitions$o n at rig$t.


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E< ense Reco$nition


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Full Disclosure9ro&iding information t$at is of sufficient importance to

influence t$e %udgment and decisions of an informed user.

9ro&ided t$roug$;Financial Statements

otes to t$e Financial Statements

Supplementary information

THIRD %EVE%0 (A*IC PRI&CIP%E*

LO -


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(E2 B0 Identify $ic$ basic rinci le of accounting is bestdescribed in eac$ item belo .

(a4 Par!alat 1I0A4 reports re&enue in its incomestatement $en it deli&ered goods instead of $ent$e cas$ is collected.

1b4 'oo$le 1#SA4 recogniHes depreciation e pense fora mac$ine o&er t$e 2 year period during $ic$ t$atmac$ine $elps t$e company earn re&enue.

1c4 /C Cor . 1#SA4 reports information about pending

la suits in t$e notes to its financial statements.1d4 Fu5i Fil! 1 9 4 reports land on its statement of

financial position at t$e amount paid to ac(uire it,e&en t$oug$ t$e estimated fair mar!et &alue isgreater.

Re,enueReco$nition

E< enseReco$nition

FullDisclosure

easure!ent

THIRD %EVE%0 (A*IC PRI&CIP%E*

LO -


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>. Describe the i! act that the costconstraint has on re ortin$accountin$ infor!ation.





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5ompanies must eig$ t$e costs of pro&iding t$e informationagainst t$e benefits t$at can be deri&ed from using it.

Rule ma!ing bodies and go&ernmental agencies use costbenefit analysis before ma!ing final t$eir informational

re(uirements.

In order to %ustify re(uiring a particular measurement or

disclosure, t$e benefits percei&ed to be deri&ed from it

!ust e


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(E2 110 Determine $et$er you ould classify t$esetransactions as material.

1a4 In t$e current year, /lair 5o. reduces its baddebt e pense to ensure anot$er positi&e

earnings year. 0$e impact of t$is ad%ustment ise(ual to "N of net income.

1b4 Damon 5o. e penses all capital e(uipmentunder 2,)LL on t$e basis t$at it is immaterial.

0$e company $as follo ed t$is practice for anumber of years.

%i#el7 not!aterial

aterial

THIRD %EVE%0 CO*T CO&*TRAI&T

LO .


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*u!!ar7 ofthe *tructure

LO .


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THE CO&CEPT-A% FRA EWOR/0$e IAS/ and t$e FAS/ $a&e been or!ing toget$er to de&elop a commonconceptual frame or!. 0$is frame or! is based on t$e e isting conceptualframe or!s underlying #.S. =AA9 and IFRS. 0$e ob%ecti&e of t$is %oint pro%ect

is to de&elop a conceptual frame or! consisting of standards t$at areprinciples based and internally consistent, t$ereby leading to t$e most usefulfinancial reporting.

'%O(A% ACCO-&TI&' I&*I'HT*


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Rele,ant FactsFollo ing are t$e !ey similarities and differences bet een #.S. =AA9 andIFRS related to t$e 5onceptual Frame or! for Financial Reporting.

*i!ilarities

• In 2L8L, t$e IAS/ and FAS/ completed t$e first p$ase of a %ointly createdconceptual frame or!. In t$is first p$ase, t$ey agreed on t$e ob%ecti&e offinancial reporting and a common set of desired (ualitati&e c$aracteristics.0$ese ere presented in t$e 5$apter 2 discussion. ote t$at prior to t$iscon&erged p$ase, t$e 5onceptual Frame or! ga&e more emp$asis to t$eob%ecti&e of pro&iding information on management7s performance1ste ards$ip4.



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Rele,ant Facts*i!ilarities

• 0$e e isting conceptual frame or!s underlying #.S. =AA9 and IFRS are&ery similar. 0$at is, t$ey are organiHed in a similar manner 1ob%ecti&e,

elements, (ualitati&e c$aracteristics, etc.4. 0$ere is no real need to c$angemany aspects of t$e e isting frame or!s ot$er t$an to con&erge different

ays of discussing essentially t$e same concepts.

• 0$e con&erged frame or! s$ould be a single document, unli!e t$e t oconceptual frame or!s t$at presently e ist. It is unli!ely t$at t$e basicstructure related to t$e concepts ill c$ange.



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Rele,ant Facts*i!ilarities

• /ot$ t$e IAS/ and FAS/ $a&e similar measurement principles, based on$istorical cost and fair &alue. In 2L88, t$e /oards issued a con&erged

standard on fair &alue measurement so t$at t$e definition of fair &alue,measurement tec$ni(ues, and disclosures are t$e same bet een #.S.=AA9 and IFRS $en fair &alue is used in financial statements.

Differences

• Alt$oug$ bot$ #.S. =AA9 and IFRS are increasing t$e use of fair &alue toreport assets, at t$is point IFRS $as adopted it more broadly. As e amples,under IFRS, companies can apply fair &alue to property, plant, ande(uipment@ natural resources@ and, in some cases, intangible assets.



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Rele,ant FactsDifferences

• #.S. =AA9 $as a concept statement to guide estimation of fair &alues $enmar!et related data is not a&ailable 1Statement of Financial Accounting

5oncepts o. +, #sing 5as$ Flo Information and 9resent alue inAccountingJ4. 0$e IAS/ $as not issued a similar concept statement@ it $asissued a fair &alue standard 1IFRS 8"4 t$at is con&erged it$ #.S. =AA9.

• 0$e monetary unit assumption is part of eac$ frame or!. o e&er, t$e unitof measure ill &ary depending on t$e currency used in t$e country in $ic$t$e company is incorporated 1e.g., 5$inese yuan, apanese yen, and /ritis$pound4.



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Rele,ant FactsDifferences

• 0$e economic entity assumption is also part of eac$ frame or! alt$oug$some cultural differences result in differences in its application. For

e ample, in apan many companies $a&e formed alliances t$at are sostrong t$at t$ey act similar to related corporate di&isions alt$oug$ t$ey arenot actually part of t$e same company.



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About The &u!bersW$ile t$e conceptual frame or! t$at underlies #.S. =AA9 is &ery similar to t$atused to de&elop IFRS, t$e elements identified and t$eir definitions under #.S.=AA9 are different.



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On the Hori on0$e IAS/ and t$e FAS/ face a difficult tas! in attempting to update, modify,and complete a con&erged conceptual frame or!. 0$ere are many c$allengingissues to o&ercome. For e ample, $o do e trade off c$aracteristics suc$ as

$ig$ly rele&ant information t$at is difficult to &erifyG o do e define control $en e are de&eloping a definition of an assetG Is a liability t$e futuresacrifice itself or t$e obligation to ma!e t$e sacrificeG S$ould a singlemeasurement met$od, suc$ as $istorical cost or fair &alue, be used, or does itdepend on $et$er it is an asset or liability t$at is being measuredG We are

optimistic t$at t$e ne con&erged conceptual frame or! ill be a significantimpro&ement o&er its predecessors and ill lead to standards t$at ill $elpfinancial statement users to ma!e better decisions.



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ch02 - Akuntansi Intermediete Kieso