Acca f3 Financial Accounting (int) Study Text
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- Bu səhifədəki naviqasiya:
- general purpose financial statements
- Liquidity and solvency
- Changes in financial position
36 3: Accounting conventions Part B The qualitative characteristics of financial information and the fundamental bases of accounting 3.2.1 Purpose and status The introduction gives a list of the purposes of the Framework. (a) Assist the Board of the IASB in the development of future IFRSs and in its review of existing IASs. (b)
Assist the Board of the IASB in promoting harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IASs. (c) Assist national standard-setting bodies in developing national standards. (d) Assist preparers of financial statements in applying IFRSs and in dealing with topics that have yet to form the subject of an IFRS. (e) Assist
(f)
Assist users of financial statements in interpreting the information contained in financial statements prepared in conformity with IFRSs. (g) Provide those who are interested in the work of IASB with information about its approach to the formulation of IFRSs. The
purpose of the IASB Framework is given as background information, it is unlikely to be tested in the exam.
The Framework is not an IFRS and so does not overrule any individual IFRS. In the (rare) cases of conflict between an IAS or IFRS and the Framework, the IAS or IFRS will prevail. These cases will diminish over time as the Framework will be used as a guide in the production of future IFRSs. The Framework itself will be revised occasionally depending on the experience of the IASB in using it. 3.2.2 Scope The Framework deals with: (a) The
(b) The
qualitative characteristics that determine the usefulness of information in financial statements (c) The
definition, recognition and measurement of the elements from which financial statements are constructed (d) Concepts of
capital and capital maintenance We are only concerned with (a) and (b) here. The Framework is concerned with
statements), but it can be applied to other types of accounts. A complete set of financial statements includes: (a)
A statement of financial position (b)
An income statement (c)
A statement of changes in financial position (eg a statement of cash flows) (d)
Notes, other statements and explanatory material Supplementary information may be included, but some items are not included, namely commentaries and reports by the directors, the chairman, management etc. All types of financial reporting entities are included (commercial, industrial, business; public or private sector). A
source of financial information about the entity. (Framework) Exam focus point
Key term Part B The qualitative characteristics of financial information and the fundamental bases of accounting 3: Accounting conventions 37 3.2.3 Users and their information needs We have already looked at the users of accounting information in Chapter 1 . They consist of investors, employees, lenders, suppliers and other trade payables, customers, government and their agencies and the public. Financial statements cannot meet all these users' needs, but financial statements which meet the needs of investors (providers of risk capital) will meet most of the needs of other users. The Framework emphasises that the preparation and presentation of financial statements is primarily the responsibility of an entity's management. Management also has an interest in the information appearing in financial statements. 3.3 The objective of financial statements The Framework states that: 'The objective of financial statements is to provide information about the financial position performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.' Such financial statements will meet the needs of most users. The information is, however, restricted. (a) It is
based on past events not expected future events. (b)
It does not necessarily contain non-financial information. The statements also show the results of the management's stewardship. 3.3.1 Financial position, performance and changes in financial position It is important for users to assess the
employees, lenders etc. Financial position information is affected by the following and information about each one can aid the user.
(a) Economic resources controlled: to predict the ability to generate cash (b)
Financial structure: to predict borrowing needs, the distribution of future profits/cash and likely success in raising new finance (c)
(liquidity relates to short-term commitments, solvency is longer-term) In all these areas, the capacity to adapt to changes in the environment in which the entity operates is very important. Financial performance (income statement) information, particularly profitability, is used to assess potential changes in the economic resources the entity is likely to control in future. Information about performance variability is therefore important.
investing, financing and operating activities. They show the entity's ability to produce cash and the needs which utilise those cash flows. All parts of the financial statements are interrelated, reflecting different aspects of the same transactions or events. Each statement provides different information; none can provide all the information required by users. 3.4 Underlying assumptions We have met two of the assumptions discussed here in Section 2 and the other in Chapter 1. Here is a quick revision. Yüklə 3,78 Mb. Dostları ilə paylaş:
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