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The Conceptual Framework and IFRS Standards (The Conceptual Framework…
The Conceptual Framework and IFRS Standards
The Conceptual Framework
Set of principles that underpin financial accounting
Guidance for auditors, accountants and regulators
IASB most widely used
Financial Statements
Financial Position
Shows strengths and weaknesses, liquidity and solvency, need for additional investment
Profit/loss
Shows performance of business for the period, return generated on resources
Cash flow
Shows liquidity
Scope of the Framework
Objective of reporting
Provide useful information for users (investors and creditors)
Qualitative characteristics
Relevant, faithful representation, comparability, verifiability, timeliness, understandability
Financial statements
Going concern, accruals, prudent, substance over form
Definitions
Recognition/de-recognition
Recognised when provides future economic benefits, reliably measurable
Measurement
Valuation methods
Presentation and disclosure
Statements facilitate communication between directors and shareholders
Capital and capital maintenance
High quality financial information
Investor confidence
More liquid and effecient capital markets
Reduce firms cost of capital
IFRS
Issued by IASB
IFRS Process
Agenda consultation
Research
Discussion paper
Exposure draft
Final standard published
Review of outcomes
Different standards for SMEs (small-medium sized companies)
Less complex and more accessible
Principles-based
Means accountants must use professinal judgement to faithfully represent information, even if no specific standard exists