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CONCEPTUAL FRAMEWORK1FOREWORDIASB is in the process of updating the Conceptual Framework.Framework for the Preparation & Presentation of Financial Statements (1989)Conceptual Framework for Financial Reporting (2010)INTRODUCTIONFinancial statements are prepared and presented for external users by many international entities. However, there are visible differences found in its preparation and presentation.IASB is committed to narrow these differences by seeking to harmonize regulations, accounting standards and procedures in preparing and presenting financial statements.WHAT IS THE FRAMEWORK?The Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.Provides a theoretical background or general frame of reference when setting new standards.PURPOSEAssists the Board and national standard setting bodies in developing IFRS and national standards.Assists preparers of financial position, auditors and users in dealing and complying with IFRS.Provides interested users in the work of the IASB with information about IFRS formulation.Purpose5STATUSThe Framework is not a standard. Thus, it is overridden by IFRS.In the absence of a standard, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in relevant and reliable information.In cases of conflicts, the IFRS prevails over the Conceptual Framework.6SCOPEObjective of financial reporting;Qualitative characteristics of useful financial information;Definition, recognition and measurement of the elements from which financial statements are constructed; andConcepts of capital and capital maintenance.CHAPTER ONE, INTRODUCTIONIt is the foundation of the Framework.Other aspects logically flow from the objective:Qualitative CharacteristicsElements of Financial PositionRecognitionPresentation and DisclosureIntroduction - ABEGHAIL8OBJECTIVE OF GENERAL PURPOSE FINANCIAL REPORTINGThe objective of general purpose financial reporting is to provide information about the reporting entity that is useful and to existing and potential investors, lenders, and other creditors in making useful decisions about providing resources to the entity.Obj of gen purpose fr9LIMITATIONS OF FINANCIAL REPORTINGIt do not and cannot provide all of the information that primary users need and they are not designed to show the value of a reporting entity. To a large extent, general purpose financial reports are based on estimate and judgment rather than exact depiction.limitation10USERS OF FINANCIAL REPORTSPrimary UsersExisting and Potential InvestorsLenders and Other CreditorsOther UsersEmployeesCustomersGovernment and their agenciesGeneral PublicINFORMATION ABOUT A REPORTING ENTITYS ECONOMIC RESOURCES AND CLAIMS AND CHANGES IN RESOURCES AND CLAIMSGeneral purpose financial reports provide information about the financial position and the effects of transactions and other events that changes an entitys economic resources and claims.Info re ERC changes in ERC12ECONOMIC RESOURCES AND CLAIMSThe information about the entitys economic resources (assets) and claims against the reporting entity (liabilities and equity) is the financial position which is prepared at a particular moment in time.It can also help users to identify the reporting entitys financial strengths and weaknesses.That information can help users to assess the reporting entitys liquidity, solvency, and the need for additional financing.ERC13CHANGES IN ECONOMIC RESOURCES AND CLAIMSChanges in a reporting entitys economic resources and claims result from that entitys financial and from other events or transactions such as issuing debt or equity.Certain information are necessary to t give users a complete understanding of why the entitys economic resources and claims changed and the implications of those changes on future financial performance.14Financial performance reflected by accrual accountingInformation about a reporting entitys economic resources and claims and changes in its economic resources and claims during a period provides a better basis for assessing the entitys past and future performance than information solely about cash receipts and payments during that period.Accrual ac15Financial performance REFLECTED BY PAST CASH FLOWSInformation about cash flows helps users understand a reporting entitys operations, evaluate its financing and investing activities, assess its liquidity or solvency and interpret other information about financial performance.Past cash flows16Changes in economic resources and claims not resulting fromfinancial performanceInformation about this type of change is necessary to give users a complete understanding of why the reporting entitys economic resources and claims changed and the implications of those changes for its future financial performance.Equity financingChanges in ERC fin perf17Chapter 2TO BE ADDEDABEGHAIL18CHAPTER 3, QUALITATIVE CHARACTERISTICSQualitative characteristics are the qualities or attributes that make financial information useful to users. In deciding which information to include in financial statements, the objective is to ensure that the information is useful to the users in making economic decisions.intro19FUNDAMENTAL QUALITATIVE CHARACTERISTICSfundamental20ENHANCING QUALITATIVE CHARACTERISTICSenhancing21COST CONSTRAINTCost is a pervasive constraint on the information that can be provided by financial reporting.Reporting financial information imposes costs and must be justified by the benefits of financial reporting.The rule is the benefit derived from the information should be over the cost incurred in obtaining the information.However, its evaluation is substantially a judgmental process.Cost constraint22SUMMARYStatus The Framework is not a standard. Thus, it is overridden by IFRS.

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