ACCOUNTIN

G PLUS
Accounting Framework
and the Profession

Module II
TIMOLEON S. LIANZA
 4
describe the purpose of
conceptual framework PURPOSE

Assist the International Accounting standards

Board to develop IFRS (standards) that are
based on consistent concepts.

Assist preparers to develop consistent

accounting policies when no standard
applies or when a standard allows a choice
of policy.

Assist all parties to understand and

interpret the Standards (PAS and PFRS)

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 describe the purpose of
4 conceptual framework
As the purpose of financial
reporting is to provide useful
information as a basis for
The Conceptual economic decision making…
i nder: Framework is not
Rem
a Standard. a conceptual framework
will form a theoretical basis
for determining how
Nothing in the Conceptual transactions should be
Framework overrides any measured (historical value or
standard or any requirement in current value) and reported –
a Standard. ie how they are presented or
communicated to users.

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 enumerate the qualitative
5 characteristics of accounting
information

Fundamental RELEVANCE
Qualitative
Characteristics FAITHFUL REPRESENTATION
Qualitative
Characteristics
Enhancing
Qualitative
Characteristics

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 enumerate the qualitative
5 characteristics of accounting
information
Fundamental Qualitative

Relevance Relevance
Characteristics

In the simplest terms, relevance

is the capacity of the
information to influence a
decision.

To be relevant, the financial

information must be capable of
Faithful making a difference in the
Representation decision made by users.

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 enumerate the qualitative
5 characteristics of accounting
information

Verifiability
Enhancing Qualitative
Characteristics

Verifiability
Comparability to provide a significant degree of
assurance that accounting measures
represent, what they purport to
Understandability represent.

Timeliness

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 enumerate the qualitative
5 characteristics of accounting
information

Verifiability
Enhancing Qualitative
Characteristics

Comparability
Comparability permits the identification and
understanding of similarities and
differences between items of
Understandability information.

Timeliness

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 enumerate the qualitative
5 characteristics of accounting
information

Verifiability
Enhancing Qualitative
Characteristics

Understandability
Comparability
financial information must be
comprehensible and easily
Understandability understood by its users.

Timeliness

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 enumerate the qualitative
5 characteristics of accounting
information

Verifiability
Enhancing Qualitative
Characteristics

Timeliness
Comparability
means having information available
to decision-makers before it loses its
Understandability capacity to influence decisions.

Timeliness

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 The General Objective of F/S is to provide expound the general
the following: 6 objective of financial
statements

Economic Resources of the

01 Reporting entity

02 Claims against the Entity

Changes in the Economic

03 Resources and Claims

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 illustrate the underlying
7 assumptions of preparing the
financial statements

Accounting Entity Concept

is an accounting term for a company
that has the resources needed to
GOING CONCERN continue operating indefinitely until
Time Period
ASSUMPTION it provides evidence to the contrary.

Monetary Unit

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 Elements directly related to the introduce items found in the

measurement of Financial 8 balance sheet and income

statement
Position
Elements directly related to the
measurement of Financial
LIABILIT Performance
ASSETS
IES

INCOME

EQUITY
EXPENSE

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THANK YOU