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GENERALLY ACCEPTED

ACCOUNTING PRINCIPLES
THE NEED TO •
DEVELOPED
STANDARDS
HISTORICAL
PRESPECTIVE
PARTIES INVOLVED
IN STANDARD
SETTING
SEC .1 •
AICPA .2 •

FASB .3 •

GASB .4 •

IMA .5 •
IT SHOULD BE - 1 •
RESPONSIVE TO NEED AND
VIEW POINTS OF THE
ENTIRE ECONOMIC
COMMUNITY .NOT JUST
THE PUBLIC ACCOUNTING
PROFESSION AND
IT SHOULD OPERATE IN -2 •
FULL VIEW OF THE PUBLIC
THROUGH A –DUE PROCESS
–SYSTEM THAT GIVES
INTRESTED PERSONS
AMPLE
OPPORTUNITY TO MAKE
THEIR VIEWS KNOWN
NATURE OF CONCEPTUAL
FRAMEWORK
A CONCEPTUAL FRAMEWORK IS LIKE ACONSTITUTION IT IS A
COHERENT SYSTEM OF INTERRELATED OBJECTIVES AND
FUNDMENTALS THAT CAN LEAD TO CONSISTENT STANDARDS
AND THAT PRESCRIBES THE NATURE .FUNCTION .AND LIMITS
OF FINANCIAL ACCOUNTING AND FINANCIAL STATEMENTS
NEED FOR CONCEPTUAL
FRAMEWORK
FIRST •
TO BE USEFUL STANDARDS SETTING •
SHOULD BUILD ON AND RELATE TO AN
EASTABLISHED BODY OF CONCEPTS
AND OBJECTIVES. A SOUNDLY
DEVELOPED CONCEPTUAL
FRAMEWORK SHOULD ENABLE THE
FASB TO ISSUE MORE USEFUL AND
CONSISTENT STANDARDS IN FUTURE
SECOND •
NEW AND EMERGING PRACTIED PROPLEMS •
SHOULD BE MORE QUICKLY SOLVED BY
REFERENCE TO AN EXISTING FRAMEWORK OF
BASIC THEORY
Recognition and Measurement Concepts

Assumptions Principles Constraints

Qualitative Elements
Characteristics Of
Of Accounting Financial
information statements

Objectives
Of financial
reporting
FIRST LEVEL *BASIC OBJECTIVES

OBJECTIVES OF OF FINANCIAL REPORTING- •

USEFUL TO THOSE MAKING INVESTMENT AND. 1 •


CREDET DECISIONS WHO HAVE A REASONABLE
UNDERSTANDING OF BUSINESS AND ECONMIC
ACTIVITIES

HELPFUL TO PRESENT AND POTENTIAL.2 •


INVESTORS, CREDITORS,AND OTHER USERS IN
ASSESSING THE AMOUNTS ,TIMING , AND
UNCERTAINTY OF FUTURE CASH FLOWS
ABOUT ECONMIC RESOURCES , THE .3 •
CLAIMS TO THOSE RESOURCES AND THE
CHANGES IN THEM
Second level
Fundamental concepts -

qualitative characteristics of* -


accounting informations

basic elements* -
qualitative characteristics
of accounting informations
primary qualities- •

relevance. 1 •

timeliness •
predictive value •
feed back value •

reliability. 2 •

verfiability - •
representional faithfulness - •
neutrality - •
Second qualities

comparability- •
consistency- •
Decision Makers and Their Characteristics

Cost \ Benefits Materiality


(Pervasive constraint) (Threshold for recognition)

Understandability

Decision Usefulness

Relevance Reliability

Predictive Feedback Timeliness Verifiabilit Representational Neutrality


value value y faithfulness

Comparability Consistency
Basic wlements
assets. 1 •
liabilities.2 •
equity.3 •
investment by owners.4 •
distribution to owners.5 •
comprehensive income.6 •
revenues.7 •
expenses.8 •
gains.9 •
losses.10 •
The third level

Recogniton and measurments •


concepts

basic assumptions* •
basic principles of accounting* •
constraints* •
basic assumptions

economic entity assumption.1 •


going concern assumption.2 •
monetary unit assumption.3 •
periodicty.4 •
basic principles of*
accounting
historical cost principle.1 •
revenue recognition principle.2 •
matching principle.3 •
full disclosure.4 •
constraints

cost – benefit relationship.1 •


materiality.2 •
industry practice.3 •
conservatism.4 •