1、A Conceptual Framework for Financial Reporting,Syllabus A12abc3abce56,Conceptual Framework,A statement of generally accepted theoretical principles which form the frame of reference for financial reporting A theoretical basis for recognition, measurement and reporting The basis for the development o

2、f new accounting standards and the evaluation of those already in existence,2,A constitution, a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function and limits of financial accounting and financial statements. (FAS

3、B) 由互相關(guān)聯(lián)的目標(biāo)和基本概念所組成的邏輯一致的體系，這些目標(biāo)和基本概念可以引導(dǎo)首尾一貫的準(zhǔn)則，并對(duì)財(cái)務(wù)會(huì)計(jì)和財(cái)務(wù)報(bào)表的性質(zhì)、作用和局限性做出規(guī)定。,3,IASB Framework of preparation and presentation of financial statements the US Statement of Financial Accounting Concepts the UK Statement of Principles Canada CICA Handbook 1000 中國(guó) 企業(yè)會(huì)計(jì)基本準(zhǔn)則,4,Usefulness,Accounting standard

4、s are developed in accordance with agreed principles instead of in a haphazard and fire-fighting approach. Accounting standards have not contradictions and inconsistencies in basic concepts Accounting standards are difficult to circumvent Strengthen the credibility of financial reporting Help deal w

5、ith complex transactions that are not the subject of the accounting standards Prevent standard setters against political pressure,5,IASB Framework,It sets out the concepts underlying financial statements prepared for external users. It is not accounting standard. In the case of conflict between an I

6、AS/IFRS and the Framework, the IAS/IFRS will prevail. Many of its provisions are repeated in IAS1 so that they are mandatory.,6,Purpose,to assist the IASB to develop new standards and promote harmonization of standards to assist other standard-setting bodies to assist preparers of financial statemen

7、ts to assist auditors to assist users of financial statements to assist those who are interested in the work of the IASB,7,Content,objective of financial statements qualitative characteristics of financial statements the reporting entity underlying assumption definition of elements of financial stat

8、ements recognition of measurement of concepts of capital and capital maintenance,8,Objective of financial statements,To provide information about a reporting entitys economic resources, claims, and changes in resources and claims which are useful to a wide range of users in making economic decisions

9、 and assessing how effectively and efficiently management has discharged their responsibilities to use the entitys existing resources (i.e., stewardship). The financial statements should be looked at as a whole together with any supplementary information.,9,Qualitative characteristics of FS,Informat

10、ion must be both relevant and faithfully represented if it is to be useful. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable.,10,Fundamental,Relevance The relevant information influences the economic decisions of users. Predictive value :

11、 help users to evaluate past, present or future events Confirmatory value: help users to confirm or correct their past evaluations,11,Materiality an entity-specific aspect of relevance based on the nature or magnitude (or both) of the items to which the information relates in the context of an indiv

12、idual entitys financial report. a threshold quality that information must possess for it to be useful. It needs to be studied before considering the other qualitative characteristics. The information is material if its omission or misstatement could influence the economic decisions of users.,Faithfu

13、l representation represent faithfully the transactions and events that it purports to represent Economic substance over legal form This kind of information can be depended on by users if it possesses the following merits. Completeness (free from material omission) Neutrality (free from deliberate or

14、 systematic bias) free from material error ( but allow estimation),13,Prudence Exercising a degree of caution in making judgment about estimates required under conditions of uncertainty, such that assets and gains are not overstated and liabilities and losses are not overstated.,Enhancing,Comparabil

15、ity Information about a reporting entity is more useful if it can be compared with a similar information about other entities and with similar information about the same entity for another period or another date. Comparability enables users to identify and understand similarities in, and differences

16、 among, items. Disclose the accounting polices and the change in them (Application of IAS 8); Show corresponding information for the preceding periods,15,Verifiability Verifiability helps to assure users that information represents faithfully the economic phenomena it purports to represent. Verifiab

17、ility means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation. Direct or indirect,Timeliness means that information is available to decision-makers in time to be capable

18、of influencing their decisions.,Understandability Classifying, characterising and presenting information clearly and concisely makes it understandable. While some phenomena are inherently complex and cannot be made easy to understand, to exclude such information would make financial reports incomple

19、te and potentially misleading. Financial reports are prepared for users who have a reasonable knowledge of business and economic activities and who review and analyse the information with diligence.,Balance among quality characteristics Balance between benefit and cost Cost is a pervasive constraint

20、 on the information that can be provided by general purpose financial reporting. Reporting such information imposes costs and those costs should be justified by the benefits of reporting that information.,19,Underlying assumptions p182,Going concern assumption the financial statements presume that a

21、n entity will continue in operation indefinitely or, if that presumption is not valid, disclosure and a different basis of reporting are required.,20,Exercises,4 F7pilot paper 4 Dec07 Jun08 4 Jun11,21,Elements of financial statements,Five elements are identified. Only these elements should be includ

22、ed in the financial statements. Assets resources controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow.,22,Liabilities present obligations of the enterprise arising from past events, the settlement of which is expected to result in an ou

23、tflow of economic benefits. Equity the residual interest left after the liability have been deducted from the assets. It consists of owners contribution and different reserves.,23,Income Expenses increases decreases in economic benefits during the accounting period in the form of inflows or enhancem

24、ents outflows or depletions of assets or decreases incurrence in liabilities that result in increases decrease in equity, other than those relating to contribution from distributions to equity participants. SFP approach (on the basis of changes in assets/ liabilities) instead of IS approach,24,Recog

25、nition of elements of FS,Depicting an item in words (with additional disclosure if necessary) and by a monetary amount and the inclusion of that amount in the financial statement totals. The items failing to meet the recognition criteria may need to be disclosed. Stages of recognition initial recogn

26、ition, subsequent remeasurement and derecognition,25,Recognition criteria for assets and liabilities / income and expenses comes with the definition of an elements of financial statements It is probable that any future economic benefit associated with the item will flow to or from the entity; and Th

27、e items cost or value can be measured with reliability.,26,Measurement of elements of FS p182,The process of determining the monetary amounts at which items will be stated in the financial statements. Four different basis of measurement Historical cost Current/replacement cost (current entry value)

28、Net realisable/settlement value (current exit value) Present value of future cash flows (economic value, value in use）,27,Example 4, p186,IFRS 13 FV measurement,Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market parti

29、cipants at the measurement date,28,Capital maintenance concepts,Profits can be realized only after an organizations capital has been maintained at a predetermined level. Financial capital maintenance (FCM) Set aside profits in order to preserve the value of shareholders funds in real terms. Money FC

30、M /CPP FCM Physical /Operating capital maintenance (PCM, OCM) Set aside profits in order to allow the business to continue to operate at current levels of activity.,29,Example,Beginning $100 / 1 unit inventory = $100/ capital Inventory was sold for $160. Inflation rate is 20%. Ending Current cost of

31、 1 unit inventory was $150. Profit under FCM and PCM?,31,Historical cost accounting,Advantage recording assets at their original historical costs reduces subjectivity to a minimum record gains until they are realised.,32,Disadvantage asset values are outdated, particularly understated (inflation) Ig

32、nore the effect of rising prices on monetary items profits are overstated (match historical cost with current revenue, inflation). If profits were distributed in full, the level of operations would have to be curtailed. ROCE is overstated Less comparability,Example 5, p184,Constant purchasing power

33、accounting,Monetary items already stated at current purchasing power, and no adjustment is required. Gain or loss on purchasing power Non-monetary items uplift to reflect price level at the reporting date (CPP units). Residual figure neither a monetary or a non-monetary item,34,Advantage simple and

34、objective a true system of inflation accounting measure the impact on the company in terms of shareholders purchasing power Disadvantage fail to capture specific and general price divergences CPP currency units can be unfamiliar does not show current value of assets and liabilities physical capital

35、is not maintained,35,Current cost accounting,Monetary items no adjustment is required. Non-monetary items Based on deprival value or value to business Cost of sales adjustment takes the realised holding gain element out of profit Depreciation adjustment charges the CC depreciation on the year-end (or average) CC to income statemen