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Conceptual Framework (Enhancing Qualitative Characteristics of Financial…
Conceptual Framework
Enhancing Qualitative Characteristics of Financial Reports
Comparability
Financial reports should be able to compare aspects of the entity from one point of time to another and should be also able to be compared with other entities
Verifiability
Information faithfully represents what it suggests its representing
Timeliness
Accounting information is available to stakeholder in time to make informed decisions
Understandability
Information should be prepared in the most understandable manner without sacrificing relevance or reliability
Elements of financial statements
Assets
Resources controlled by the entity as a result of past events from which future economic benefits are expected to incur.
Recognition criteria: control, past event, economic benefit
Liabilities
A present obligation of the entity as a result of past events , which is expected to result in an outflow of resources
Recognition criteria: present obligation, arising from past event, resulting in outflow
Equity
Residual interest on the assets of the entity after deducting its liabilities .
Increased through owners contributions and excess income over expenses.
Assets - liability = equity
Expense
Decreases in economic benefits during an accounting period in the form of outflows or depletion of existing assets.
Recognition criteria: decrease in economic benefits that can be reliably measuresd
Fundamental Qualitative Characteristics of Financial Reports
Relevance
information should have predictive and confirmatory value for users
Faithful Representation
The information faithfully represents the phenomenon happening within the company
Financial information will be complete, neutral and free from error
AASB's statements of accounting concepts