Framework for Preparation and Presentation of Financial

Statements

Framework for Preparation Basics

Meaning

• The framework provides a road map and approach which

eventually will be considered as broad lines within which

generally all accounting standards will be applied

• These are theoretical principles provide the basis for both the

development of new reporting practices and the evaluation of

existing ones.

• Financial Statements are kind of a statement which reflects the

performance of a business (business might be for profit or for

non-profit) during a period (may be for a year, month, or quarter

etc.) for which such statement is being prepared.

• Hence, the Financial Statements consist of presentation of

numbers in such a way which reflects movements within

specified category (assets, liability and Income/ expenses) with

explanations/ notes (by way of notes to accounts & disclosures)

to understand the methodology as adopted by an entity.

 Framework and its Purpose

• Assist in the development of future AS and review of existing AS

• Assist preparers of financial statements in applying AS and in

dealing with topics that have yet to form the subject of an AS

• Assist users of financial statements in interpreting the

information contained in financial statements prepared in

conformity with AS

• Assist auditors in forming an opinion

Status of the “FRAMEWORK”

• The framework applies to general-purpose financial statements

prepared for external users (usually prepared annually)

• Applicable for

o All commercial, industrial and business enterprises

o Public or private sector

• The special purpose financial reports, outside the scope of this

framework.

• Always AS overrides framework in case of any conflict

Users of Financial Statements

• Investors,

• Employees

• Lenders,

• Supplier/ Creditors,

• Customers etc