Pervasive topics Flashcards
IFRS
- International Financial Reporting Standards
- compulsory for listed companies
- important for comparison with international comp.
Purpose of Conceptual Framework (CF)
Describes objectives and concepts for general purpose of financial reporting
Mission: provide transparency, accountability and efficiency
Objective of general purpose financial reporting (GPFR) (1)
- to provide financial info about reporting entity that is useful to primary users (investors, lenders and other creditors)
Accrual accounting
Depicts the effects of transactions and other events on economic resources/ claims in the periods in which those effects occur.
Qualitive characteristics of useful financial info. (2)
- Fundamental
- influences users’ decisions
- primary requirements - Enhancing
Fundamental characteristics
- Relevance
- Predictive value
- Confirmatory value
- Materiality - Faithful representation
- completeness
- neutral
- free from material error
Enhancing characteristics
- Comparability
- Verifiability
- Timeliness
- Understandability
Materiality
Info is material if omitting or misstating it could influence decisions that users make on the basis of financial info
Objective of financial Statements (3)
Provide financial info about assets, liabilities, equity, income and expenses
- Specified period of time,
- Perspective of reporting entity,
- assumption of going concern
Elements of financial statements
- Assets
- Liabilities
- Equity
- Income
- Expenses
Assets
- present economic resource
- controlled by entity
- as a result of past events
- a right
- potential to produce economic benefit
Liabilities
- present obligation
- to transfer an economic resource
- as a result of a past event
Equity
- residual interest in the interest in the assets of an entity after deducting all its liabilities
Income
- increases in assets or decreases in liabilities
- results in increases in equity
Expenses
- decreases in income or increases in liabilities
- results in decreases in equity
