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The Conceptual Framework - Coggle Diagram

- - - - For example, IAS 37
      - probable outflow of economic benefits will result in provisions being recognied while probable inflow of economic benefits will only result in contingent asset being disclosed
      - Therefore, two sides in the same court case would have differing accounting treatment despite the likelihood of pay-out being identical for either party
      - Many respondents highlighted this asymmetric prudence as necessary under some accounting standards and felt that a discussion of the term was required.
      - Whilst this is true, the Board believes that the Framework should not identify asymmetric prudence as a necessary characteristic of useful financial reporting.
    - - such as the need for more persuasive evidence to support the recognition of assets than liabilities.
      - such asymmetry may sometimes arise as a consequence of requiring the most useful information.
  - - - then they could not result in a faithful representation.
- - - - as different financial reporting standards apply different criterion
        
        for example, some apply probable, some virtually certain and some reasonably possible
    - - However, there is a problem to relevance
        
        If the probability of the event is low, this may not be the most relevant information
        
        The most relevant information
        
        potential magnitude of the item
        
        the possible timing
        
        the factors affecting the probability
        
        Even stating all of this, the Framework acknowledges that the most likely location for items such as this is to be included within the notes to the financial statements.
- - - - entity-specific information is more useful than standardised descriptions
      - duplication of information in different parts of the financial statements is usually unnecessary and can make financial statements less understandable
  - - - Historical cost
        
        and are certainly unlikely to provide relevant information about derivatives.
        
        some variation of current value will be used to provide more predictive information to users.
        
        may not provide relevant information about assets held for a long period of time
      - fair value
        
        may not be relevant if items are held solely for use or to collect contractual cash flows.
      - items used in a combination to generate cash flows by producing goods or services to customers
        
        As these items are unlikely to be able to be sold separately without penalising the activities, a cost-based measure is likely to provide more relevant information, as the cost is compared to the margin made on sales
- - - - some commenters argue that all OCI items should be recycled
      - Others argue that OCI items should never be recycled
      - some argue that only some items should be recycled.