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2 CONCEPTUAL FRAMEWORK FOR
FINANCIAL REPORTING - 2018
FRANCIS H.VILLAMIN
3 CONCEPTUAL FRAMEWORK FOR
FINANCIAL REPORTING
Learning Objectives
• State the purpose, status, and scope of the Conceptual
Framework.
• State the objective of financial reporting.
• Identify the primary users of financial statements.
• Explain briefly the qualitative characteristics of useful
information and how they are applied in financial reporting.
CONCEPTUAL FRAMEWORK FOR
4 FINANCIAL REPORTING
Learning Objectives:
• Define the elements of financial statements and state their
recognition criteria and their derecognition.
• State the measurement bases used in financial reporting.
5
CONCEPTUAL FRAMEWORK
LO 4
FUNDAMENTAL CONCEPTS
Fundamental Quality—Relevance
Fundamental Quality—Relevance
Fundamental Quality—Relevance
Fundamental Quality—Relevance
Conceptual Framework
for Financial Reporting
LO 4
FUNDAMENTAL CONCEPTS
Enhancing Qualities
Enhancing Qualities
Enhancing Qualities
Enhancing Qualities
Reporting period
• Financial statements are prepared for a specific period of time
(i.e., the reporting period) and include comparative
information for at least one preceding reporting period.
Going concern
• Financial statements are normally prepared on the assumption
that the reporting entity is a going concern, meaning the
entity has neither the intention nor the need to end its
operations in the foreseeable future.
37 FINANCIAL STATEMENTS AND
THE REPORTING ENTITY
Reporting entity
• A reporting entity is one that is required, or chooses, to
prepare financial statements, and is not necessarily a legal
entity. It can be a single entity or a group or combination of
two or more entities.
BASIC ELEMENTS
Elements of Financial Statements
Equity
Income
Expenses
BASIC ELEMENTS
Elements of Financial Statements
Asset
A present obligation of the entity arising
from past events, the settlement of which
Liability
is expected to result in an outflow from the
entity of resources embodying economic
Equity benefits.
Income
Expenses
BASIC ELEMENTS
Elements of Financial Statements
Asset
Liability
Income
Expenses
BASIC ELEMENTS
Elements of Financial Statements
Asset
Liability
Asset
Liability
• Income
Income is “increases in assets, or decreases in liabilities, that
result in increases in equity, other than those relating to
contributions from holders of equity claims.” (Conceptual Framework
4.68)
• Expenses
Expenses are “decreases in assets, or increases in liabilities,
that result in decreases in equity, other than those relating to
distributions to holders of equity claims.” (Conceptual Framework 4.69)
RECOGNITION, MEASUREMENT, AND
51 DISCLOSURE CONCEPTS
1. Historical cost
2. Current value
a. Fair value
b. Value in use and fulfilment value
c. Current cost
56 HISTORICAL COST
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