THE IASB CONCEPTUAL

beansproutscompleteΛογισμικό & κατασκευή λογ/κού

13 Δεκ 2013 (πριν από 3 χρόνια και 7 μήνες)

104 εμφανίσεις

Slide 2.
1

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

THE IASB CONCEPTUAL
FRAMEWORK

ACTG 6580
-
CHAPTER 2

Slide 2.
2

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Scope of the IASB
Conceptual

Framework

The IASB
Conceptual

Framework

identifies
the concepts that underlie general purpose
financial statements prepared and
presented for the benefit of external users.

Slide 2.
3

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Purpose of the IASB
Conceptual

Framework


To assist in development of IFRS/IAS


To provide a basis for reducing alternatives


To assist national standard
-
setters in
developing national standards


To assist preparers of financial statements in
applying international standards


To assist auditors in forming an opinion as to
whether international standards have been
complied with


To assist users in interpreting financial
statements

Slide 2.
4

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Evolution of the Conceptual Framework

1970s

1970

1972

1974

1976

1978

1971: Trueblood
Study

FASB

IASB

1972: Wheat
Report

1973: FASB
formed

1974: Discussion
memorandum,
Objectives of
Financial Reporting by
Business Enterprises

1976: Tentative conclusions
on
Objectives of Financial
Reporting by Business
Enterprises

1978:
SFAC No. 1,
Objectives of Financial
Reporting by Business
Enterprises

1973: IASC
formed

1973
-
88: Countries joining
IASC

Slide 2.
5

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

1980:
SFAC No. 3,
Elements of Financial
Statements of Business
Enterprises


Evolution of the Conceptual Framework

1980s

1980

1982

1984

1986

1988

1980:
SFAC No. 2,
Qualitative
Characteristics of Accounting
Information

1984: SFAC No. 5,
Recognition and Measurement
in Financial Statements of
Business Enterprises


1985: SFAC No. 6,
Elements of
Financial Statements

(supersedes SFAC No. 3)

1989:
Final Statement,
Framework for the
Preparation and Presentation of Financial
Statements


FASB

IASB

Slide 2.
6

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Evolution of the Conceptual Framework

1990s and 2000s

1998

2000

2002

2006

2010

2000: SFAC No. 7,
Using
Cash Flow Information and
Present Value in Accounting
Measure

2002:
Norwalk Agreement

to
converge

2006:
Norwalk Agreement

reaffirmed

1997: Decision
to re
-
examine
structure


1999: IASC restructured to
form IASB

2002:
Norwalk Agreement

to
converge

2006:
Norwalk Agreement

reaffirmed

FASB

IASB

2010:
Converged
Chapters 1 and 3 of the
FASB’s SFAC No. 8,
Conceptual Framework for
Financial Reporting

2010:
Converged
Chapters 1 and 3 of the
IASB’s
Conceptual
Framework for Financial
Reporting

Slide 2.
7

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


In 2002 the FASB and the IASB agreed to make their accounting standards
compatible, including the Conceptual Framework.


Framework broken into eight phases as follows:


Phase A


Objectives and Qualitative Characteristics


issued Sept.
2010


Phase B


Elements and Recognition


Discussion Paper expected
soon????


Phase C


Measurement


Discussion Paper expected soon????


Phase D


Reporting Entity Concept


Discussion Memorandum out


Not started yet:


Phase E


Presentation and Disclosure


Phase F


Framework Purpose and Status in US GAAP


Phase G


Applicability to the Not
-
for
-
Profit Sector


Phase H


Remaining Issues

Convergence with FASB

Slide 2.
8

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


“The objective of general purpose financial reporting is to provide
financial information about the reporting entity that is
useful to existing
and potential investors, lenders, and creditors
(‘primary users’) in
making decisions about providing resources to the entity. Those
decisions involve buying, selling or holding equity and debt instruments,
and providing or settling loans and other forms of credit.”
3



Consequently, primary users need information to help them assess the
prospects of future net cash inflows to an entity.


To assess an entity’s prospects for future cash inflows, primary users need
information about the
resources
of the entity,
claims

against the entity and
how efficiently and effectively the entity’s
management
and
governing board
have discharged the responsibilities to use the entity’s resources.


3
SFAC No. 8,
Conceptual Framework for Financial Reporting
, Chapter 1, “The Objective of General Purpose Financial
Reporting,” OB2.


The Objective of General Purpose Financial
Reporting



Slide 2.
9

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


Continued:


General purpose financial reports do not and
cannot provide all the
information that primary users need
, therefore, pertinent information from
other sources needs to be considered, such as general economic
conditions, political events and climate and industry outlook.


General
purpose financial statements are not designed to show the value of
the reporting entity, are not designed for the sole use of management and
are
not directed towards regulators or
other parties that are not primary
users.








4
SFAC No. 8,
Conceptual Framework for Financial Reporting
, Chapter 1, “The Objective of General Purpose Financial
Reporting,” OB11.


The Objective of General Purpose Financial
Reporting



Slide 2.
10

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Users of general purpose financial
reports


Primary users:


existing/potential investors


existing/potential lenders and other creditors



Others (not listed in
Conceptual

Framework
):


employees


customers


governments and their agencies


the public


Slide 2.
11

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Qualitative Characteristics of Useful
Financial Information



Pervasive constraint:
Costs

Fundamental
characteristics:



Relevance


and

faithful
representation

Costs

Costs

Pervasive constraint:
Costs

Slide 2.
12

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


Relevance
:


Capable
of
making a difference
in the decisions made
by users.


Capable of making a difference in decisions if it has
predictive value
,
confirming value
or both
.


Materiality
:



Materiality is an element of relevance and is entity
-
specific based on the
nature or magnitude or both of the items to which the information relates,
in the context of an individual entity’s financial report.”
14


“Information
is material if omitting it or misstating it could influence
decisions that users make on the basis of the financial information of a
specific reporting entity.”
15

14
SFAC No. 8,
Conceptual Framework for Financial Reporting
, Chapter 3, “Qualitative Characteristics of Useful Financial
Information,” QC11.

15
Ibid.











Fundamental Qualitative Characteristics of
Useful Financial Information



Slide 2.
13

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


Faithful
representation
: “Financial reports represent economic
phenomena in words and numbers. To be useful, financial
information must be relevant but also must faithfully represent the
phenomena that it purports to represent.”
16


Completeness:

“all information that is necessary for a user to
understand the phenomena being depicted.”
17



Neutrality
: there should not be bias in the selection or
presentation of financial information. Financial information
should not be slanted, weighted, emphasized, de
-
emphasized or otherwise manipulated to increase the
probability that financial information will be received
favorably or unfavorably.


Free from error:
“no errors or omissions in the description of
the phenomenon, and the process used to produce the
reported information.”
18

16
SFAC
No. 8,
Conceptual Framework for Financial Reporting
, Chapter 3, “Qualitative Characteristics of Useful Financial
Information,” QC12.

17
Ibid, QC13.

18
Ibid, QC15.







Fundamental Qualitative Characteristics of
Useful Financial Information



Slide 2.
14

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Enhance
the usefulness of information that is
relevant and faithfully represented.


Comparability
:

“Enables users to identify and understand similarities
and differences among items.”
24


Consistency is not the same as comparability although
related and is described as “the use of the same methods for
the same item either from period to period within a reporting
entity or in a single period across entities.”
25


Verifiability
:


“Assures users that information faithfully represents the
economic phenomena it purports to represent.”
26


“Means that different and knowledgeable and independent
observers could reach consensus, although not necessarily
complete agreement, that a particular depiction is a faithful
representation.”
27


23
SFAC No. 8,
Conceptual Framework for Financial Reporting
, Chapter 3, “Qualitative Characteristics of Useful Financial
Information,” QC33
.

24
Ibid
,
QC21.
25
Ibid
,
QC22.
26
Ibid
, QC26
.

27
Ibid.





Enhancing Qualitative Characteristics of
Useful Financial Information



Slide 2.
15

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011


Timeliness
:

providing information to decision makers in time to be
capable of influencing their decisions
.



Understandability
: “Classifying, characterizing, and presenting
information clearly and concisely.”
28



Pervasive constraint on useful financial information:
costs
, which are
a pervasive constraint on financial information, should be assessed
as to whether the benefits of reporting particular information are
likely to justify the costs incurred to provide and use the information.








28
SFAC No. 8,
Conceptual Framework for Financial Reporting
, Chapter 3, “Qualitative Characteristics of Useful Financial
Information,” QC30.













Enhancing
Qualitative Characteristics of
Useful Financial Information






Slide 2.
16

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Underlying assumption

Financial statements are normally prepared
on the
“going concern basis”.

It is assumed that the entity will
continue in
operation for the foreseeable future
and has
neither the intention nor the need to close
down or to materially reduce the scale of its
operations.

Slide 2.
17

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Elements: Financial position


Asset


"
a resource controlled by the entity as a result of
past events and from which future economic benefits
are expected to flow to the entity"


Liability


"
a present obligation of the entity arising from past
events, the settlement of which is expected to result
in an outflow from the entity of resources embodying
economic benefits
"


Equity


"
the residual interest in the assets of the entity after
deducting all its liabilities
"

Slide 2.
18

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Convergence

Phase B


Elements and Recognition


Purpose
is to revise and clarify
various issues:


definition of asset and liability.


other elements and their
definitions.


Revise recognition criteria, resolve
derecognition and unit of account.


Asset
“…
is a present
economic resource to which an
entity has a right or other
access that others do not
have,”

which is:


Present


at date of financial
statements.


Economic resource


scarce,
provides cash.


A right or other access that others
do not have


legally enforceable
or equivalent.


Liability

“… is a present economic
obligation for which the entity is
the obligor,”

which is:


Present


at date of financial
statements.


Economic obligation


to provide
resources.


Entity is the obligor


enforceable
against entity.


The Boards are to reconsider the
definition of a liability
.


A Discussion Paper was expected
in 2011???

Slide 2.
19

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Elements: Financial performance


Income


"
increases in economic benefits during the
accounting period in the form of inflows or
enhancements of assets or decreases of liabilities
that result in increases in equity, other than those
relating to contributions from equity participants"


Expenses


"
decreases in economic benefits during the
accounting period in the form of outflows or
depletions of assets or incurrences of liabilities that
result in decreases in equity, other than those
relating to distributions to equity participants"

Slide 2.
20

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Recognition of an element

An item is recognised if:

(a)

it is
probable

that any future economic benefit
associated with the item
will flow
to or from
the entity, and

(b)

the item has a cost or value that can be
measured with reliability
.

Recognition is "
the process of incorporating in the
balance sheet or income statement an item that
meets the definition of an element and satisfies
the criteria for recognition
".

Slide 2.
21

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Measurement bases


Historical cost


Current cost


Realisable value


Present value

The measurement basis most commonly used is
historical cost but this is sometimes combined with
other bases (e.g. when valuing inventory at the lower
of cost and net realisable value). Some entities use
current cost to deal with the effects of changing prices
of non
-
monetary assets (e.g. property).

Slide 2.
22

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Financial capital maintenance

Under this concept, a profit is earned only if the
financial or money amount of the net assets at the
end of an accounting period is greater than the
financial or money amount of the net assets at the
beginning of that period, after adjusting for any
amounts contributed by or distributed to owners
during the period.


Financial capital can be measured either in
nominal monetary units or in units of purchasing
power, where purchasing power is determined in
accordance with changes in an index of general
prices.

Slide 2.
23

Alan Melville,
International Financial Reporting
, 3rd Edition,

© Pearson Education Limited 2011

Physical capital maintenance

Under this concept, a profit is earned only if the
physical operating capability of the entity at the
end of the accounting period is greater than its
physical operating capability at the start of the
period, after adjusting for any amounts contributed
by or distributed to owners during the period.