CONCEPTUAL

FRAMEWORK
 It is a coherent system of interrelated objectives and fundamentals that
can lead to consistent standards that prescribe the nature, function and
limits of financial accounting and reporting.

Fundamentals are the underlying concepts of

accounting, concepts that guide the
selection of events to be accounted for, the
measurement of those events, and the means
of summarizing and communicating them to
interested parties.
PURPOSE of CONCEPTUAL
FRAMEWORK

 It assist the Board in developing standards, to help preparers develop

consistent accounting policies where there is no applicable standard in
place and to assist all parties to understand and interpret standards.
SCOPE OF CONCEPTUAL FRAMEWORK

 1. The objective of financial reporting

 2. The qualitative characteristics of useful financial information.
 3. The definition, recognition and measurement of the elements from
which financial statements are constructed.
 4. Concepts of capital and capital maintenance.
LIMITATIONS OF GENERAL PURPOSE
FINANCIAL REPORTING

 It cannot provide the information that existing and potential investors,

lenders and other creditors need such as general economic conditions
and expectations, political events and political climate and the industry
and company outlooks.
 They are not designed to show the value of a reporting entity but they
provide information to the users to estimate the value of such entity.
 Difference and conflicting interest in information of such user.
 Based on estimates, models and judgments rather than exact depictions.
How can an information be useful?

Relevant
FUNDAMENTAL QUALITAIVE
CHARACTERISTIC OF A USEFUL
Faithfully representation
FINANCIAL INFORMATION
 RELEVANCE

MATERIALITY
 PREDICTIVE VALUE  CONFIRMATORY VALUE
 FAITHFUL REPRESENTATION

 1. Completeness
 2. Neutrality
 3. Free from errors
 4. Measurements uncertainly
ENHANCING QUALITATIVE
CHARACTERISTICS

 1. Comparability
 2. Verifiability
 3. Timeliness
 4. Understandability
UNDERLYING ASSUMPTION: GOING CONCERN