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Conceptual Framework (measurement (historical cost (original price during…
Conceptual Framework
purpose
assist
FS preparer
apply IFRS
address issues not covered in IFRS
IASB
develop future IFRS
reduce no of alternative acc treatment
other users
IASB: approach -> formulate IFRS
national standard body
develop national standards
auditors
form opinion about FS
FS users
interpret info from FS
Objectives of FR
how to make sure
going concern
company continue to operate
accrual basis
revenue or expenses is counted when it incurred
provide useful financial information
decision making
Capital and Capital Maintenance
Physical
Capital maintenance
Profits earned
closing physical capacity > opening physical capacity
2015: 20,000 units;
2016: 23,000 units;
profit of 3000 units
Capital
unit output per day
Financial
Capital
monetary amount
Capital maintenance
Profit earned
closing monetary net assets >
opening monetary net assets
2015: RM 100,000;
2016: RM 125,000;
Profit of RM 25,000
definition of FS elements
BS
A
past event
resources controlled by entity
future economic benefits
L
present obligation
past event
outflow of entity's resources
Equity
A-L
IS
I
increase economic benefits
increase assets
decrease liability
profit
measurement of performance
E
decrease economic benefitse
increase liability
decrease assets
recognition of FS elements
BS
A
measured reliably
probable inflow of future economic benefits
Equity
L
probable outflow of future economic benefits
measured reliably
IS
I
increase economic benefits
measured reliably
E
reduce economic benefits
measured reliably
measurement
historical cost
original price during purchase
current cost
market price
realisable value
how much u can get by selling
present value
discounted back from future to present
qualitative characteristics
fundamental
faithfully represent
neutral
free from bias
free from error
free from misstatements or errors
complete
all information-influence decision making-complete
relevance
predictive value
predict input
forecast value
info useful in decision making
confirmatory value
confirm predicted outcome
confirm forecast value
enhancing
timeliness
information given in time for decision making
older information, < useful in decision making
comparability
different entities
same company but different period
understandability
users
reasonable knowledge
diligence assumption
information
present, classify, characterised clearly and concisely
verifiability
direct verification
observation
indirect verification
method-> calculation of input -> results
measure and get the similar results