REVISED CONCEPTUAL

FRAMEWORK

1. Objective of the General Purpose Financial Reporting

2. Qualitative Characteristics
3. Financial Statement and Reporting Entity
4. Elements of the Financial Statements
5. Recognition and Derecognition
6. Measurement
7. Presentation and Disclosures
8. Capital and Capital Maintenance
 deals with a comprehensive set of
concepts used in financial reporting, particularly in the preparation and presentation of
general-purpose Financial Statement.
✓ It is NOT a standard and does NOT override any specific PFRS.

1. Assist FRSC in developing PFRS and its review and adoption of existing IFRS.
2. Assist preparers of the FS in applying PFRS and in dealing with topics that have yet to from
the subject of a PFRS.
3. Assist AUDITORS in forming an opinion whether Financial Statement comply with PFRS.
4. Assist in interpreting information contained in the Financial Statements.
5. Provide INTERESTED PARTIES with information about formulation of PFRS by FRSC
In case of rare conflict, the requirements of PFRS prevails over the conceptual
Frameworks.
 OBJECTIVE OF FINANCIAL REPORTING – Provide financial information about the
reporting entity that is useful to existing and potential investors, lenders, and other creditors
in making decisions about.
1. Buying, selling or holding equity or debt instruments.
2. Providing or settling loans or other forms of credits.
3. Exercising rights to vote on, or other wise influence, management’s action affects the use
of the entity resources.

- present and potential investors, lenders, and other creditors.

– employees, customers, governments, market regulators and the public.
- Assist user to assess an entity’s financial position,
particularly about its (1) financial strength and weaknesses, 2. Liquidity and solvency, 3. Need
and ability to obtain financing.
- changes in economic resources and claims result from entity’s performance and other
transactions such as issuing debt or equity instruments.
 is reflected by:
1. Accrual accounting and
2. Past cash flows.

1. FUNDAMENTAL CHARACTERISTIC – content or substance.

a. RELEVANCE – capable of making a difference to decisions
✓it has a (a) PREDICTIVE value, and (b) CONFIRMATORY value.
✓materiality
b. FAITHFUL REPRESENTATION – faithfully represent substance of what is purports to
represent.
✓Completeness
✓ Neutrality
✓Free from Error
 2. ENHANCING CHARACTERISTIC (VCUT) -presentation or form
✓Verifiability ✓Understandability
✓Completeness ✓Timeliness
COST CONTRAINTS – the benefit of producing the information needs to justify the cost of
providing and using the information.
COST – a pervasive constraint on the information provided by financial reporting.

REPORTING ENTITY – an entity that is required or chooses to prepare Financial statements.

NOT necessarily a legal entity.
FINANCIAL STATEMENTS - particular form of financial reports that provide information
about the reporting entity’s assets, liabilities, equity, income, and expenses.
CONSOLIDATED FINANCIAL STATEMENTS – parent and subsidiary as a SINGLE reporting entity.
UNCONSOLIDATED FINANCIAL STATEMENTS – parent entity ONLY.
COMBINED FINANCIAL STATEMENTS – two or more entities that are NOT linked by a
parent- subsidiary relationship.
 – related to financial positions:
1. ASSET – present economic resource controlled by the entity as a result of past events.
ECONOMIC RESOURCE – a right that has the potential to produce economic benefits.
2. LIABILITIES – present obligation of the entity to transfer an economic resource as a result
of the past events.
OBLIGATIONS – duty or responsibility that the event has NO practical ability to avoid.
3. EQUITY – the residual interest in the assets of the entity after deducting all its liabilities.
- Related to performance:
4. INCOME – increases in assets, or decreases in liabilities, that result to an increase in
equity, other that those relating to contribution from holder of equity claims.
5. EXPENSE – decrease in assets, or increase in liability that results in decrease in equity,
other than those relating to distribution to holders of equity claims.
RECOGNITION AND DERECOGNITION
RECOGNITION CRITERIA – appropriate if it result in BOTH relevant information about assets,
liabilities, and equity, income and expenses and a faithful representation of those items.
 DERECOGNITION CRITERIA – an entity derecognizes an ASSET when it loses
control of all or part of the recognized asset and derecognized a LIABILITY when it NO longer
has present obligation for all of part of the recognized liability.

UNIT OF ACCOUNT – the rights or obligations, or group of rights and obligations recognition
criteria and measurement concepts are applied.
MEASUREMENT BASES:
1. HISTORICAL COST - reflects the price of the transaction that gave rise to the related
element of Financial Statements.
2. CURRENT VALUE – reflects conditions at measurement
date. Current value includes:
a. Fair value
b. Value in use (Asset) / Fulfillment value (Liabilities)
c. Current Cost
FACTORS TO CONSIDER IN SELECTING A MEASUREMENT BASIS:
1. RELEVANCE
 a. Characteristics of the asset or liability
b. Contribution to future cash flow.
a. Measurement inconsistency
b. Measurement uncertainty – estimates
PRESENTATION AND DISCLOSURES -Statement of Profit and Loss or Other Comprehensive Income
RECYCLING – income and expense in the Other Comprehensive Income in one period is
recycled to the Statement of Profit or Loss in a future period.
COMPARABILITY
1. HORIZONTAL COMPARABILITY – comparison WITHIN an entity from ne period to the
next.
2. DIMENSIONAL COMPARABILITY – comparison BETWEEN two or more entities in the
same industry.
provides the linkage between the
concept of capital and concepts of profit since it provides the point of reference by which
profit is measured.
CAPITAL CONCEPTS: 1. Financial Concept
2. Physical concept