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DISCUSSION ON CONCEPTUAL FRAMEWORK (THE DEFINITION AND THE DEVELOPMENT),…
DISCUSSION ON CONCEPTUAL FRAMEWORK (THE DEFINITION AND THE DEVELOPMENT)
Definition
CF is a coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards and the prescribes the natures, function and limits of financial accounting and reporting.
Assist accounting standards settler in standard setting
Provide a basis for selection of alternative principles
Provide a basis for reconciling any differences
Assist preparers in absence of standards
Assists auditors in forming opinions
Assists users in interpreting financial statements
Provide transparency in standard setting
Facilitate communication
First level - Objective of financial reporting
Second level - Qualitative characteristics of accounting information and elements of financial statements
Third level - Assumptions, Principles and Constrains
Malaysia Conceptual Framework
Developed by MASB in November 2011
Similar to CF for Financial Reporting as issued by IASB
Modified to suit Malaysian economic environment and needs
MASB
Established under Financial Reporting Act 1997
Develops and issues accounting and financial reporting standards in Malaysia
Takes over the accounting standards setting responsibility from the local accounting professional bodies
Standard-setting Due Process
International Accounting Standard Board
Develops and approves IFRS
Operates under the oversight of the IFRS foundation
Formed in 2001 to replace IASC
Guided by IASB Framework
Important Finding on Malaysia Conceptual Framework
Objective of Financial Reporting
Objective usefulness and limitations
Information about reporting entity economic resources claims
Qualitative Characteristics of useful Financial Information
Assumptions
Constraints
Definition, Recognition and Measurement of The Elements from which Financial Statements are constructed
Concept of Capital of Capital Maintenance
Materials elements to be considered
Economic resources & claims
Changes in economic resources & claims
Financial performance reflected by accruals accounting
Financial performance reflected by past cash flows
Changes in economic resources and claim not resulting from financial performance
Qualitative Characteristics of Useful Financial Information
Types of important that are most useful
Relevant
Faithfully represent what it purports to represent
The usefulness of information is enhanced if it is:
Comparable
Verifiable
Timely
Understandable
Provide information about the reporting entity's
Economic resources
Claims against the reporting entity
The effects of transaction
Applying the Fundamental Qualitative Characteristics
Have 3 steps
Enhancing qualitative characteristics
The cost constraint on useful financial reporting
Definition, recognition and measurement of the elements from which financial statements are constructed
Financial position
Performance
Recognition of the elements of financial statements
Measurement of the elements of financial statements
Concepts of capital and capital maintenance
Concepts of capital
Financial Concept of Capital
Physical concept of capital
Concepts of capital maintenance
Financial capital maintenance
Physical capital maintenance
Similarities between Malaysia and IASB Conceptual Framework
The need for conceptual framework
Recognition, measurement and disclosure concepts