Conceptual Framework for Financial Reporting

CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

SCOPE OF THE FRAMEWORK
The existing framework deals with the
■ Objectives of financial statements;
■ Qualitative characteristics of financial statements;
■ Elements of financial statements;
■ Underlying Assumptions;
■ Recognition of the elements of financial statements;
■ Measurement of the elements of financial statements; and
■ Concepts of capital and capital maintenance

OBJECTIVES
The objective of general purpose financial reporting. The objective is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. The frameworks are the constitutions of the IASB. It does not supersede any standard

QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS
Qualitative characteristics are the attributes that make the information provided in financial statements useful to users. According to the Framework, the characteristics are classified into two:
–Fundamental qualitative characteristics
–Enhancing qualitative characteristics

Fundamental qualitative characteristics
•Relevance:This is the extent to which the information makes the difference in economic decision taken by present and potential investors and other users of financial statements. It also relates to the predictive value and the confirmatory value of information
•Faithful representation :This relates to the representational faithfulness of numbers and balances in the financial statement to the true state of transactions and financial events that the financial statements represent.

Enhanced qualitative characteristics
•Verifiability: This is the degree of confidence in the financial statement. The reported financial statement should be verifiable to assure users that it is free from material error and bias and can be depended on to represent what it purports to represent
•Understandability: This