Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
36 Cards in this Set
- Front
- Back
|
Define the conceptual framework |
A set of theoretical principles and concepts that unlie the presentation and preparation of financial statements |
|
|
3 reasons for the conceptual framework |
1. Assist the Board with creating new IFRS standards that are consistent. 2. Aids preparers of financial statements if there is a. No IFRS or b. A choice of IFRS's 3. Assists all parties when understanding/interpreting IFRS's. |
|
|
Why do we need financial reporting? |
Provides information to current and potential investors, lenders and other creditors to allow them to make decisions on providing economic resources to an entity. |
|
|
What do investors, lenders and other creditors need information to assess? |
1. Potential future cash flows 2. Managements stewardship of an entity's economic resources |
|
|
Qualitative characteristics |
1. Relevance 2. Faithful representation Complete, neutral and free from error Economic substance over legal form |
|
|
Enhancing characteristics |
1. Verifiability 2. Timeliness 3. Understandability 4. Comparability |
|
|
Why did the 2010 conceptual framework change? |
1. Some areas were not covered Derecognition, presentation and disclosure 2. Guidance in some areas was unclear: measurement uncertainty (which could affect faithful representation) 3. Some aspects were out of date such as: recognition criteria for assets and liabilities |
|
|
Elements of financial statements |
1. Assets 2. Liabilities 3. Equity 4. Income 5. Expenses |
|
|
Define asset |
A present economic resource controlled by an entity as a result of a past event |
|
|
Define liability |
A present obligation of an entity to transfer an economic resource as a result of a past event |
|
|
Define equity |
The residual interest in the net assets of an entity |
|
|
Define income |
Increases in assets or decreases in liabilities that result in the increase in equity |
|
|
Define expenses |
Decreases in assets or increases in liability that result in the decrease in equity |
|
|
Define economic resource |
A right that has the potential to produce economic benefits |
|
|
When would we derecognise? |
1. Lose control of an asset 2. Have no present obligation for a liability |
|
|
How do we faithfully represent the changes in an equitys net assets? |
1. Derecognise transferred, expired or consumed component 2. Recognise the gain or loss 3. Recognise any retained component |
|
|
What are the two measurement bases? |
1. Historical cost 2. Current value (fair value, value in use and current cost) |
|
|
IFRS 13 |
Fair Value Measurement |
|
|
IAS 1 |
Presentation of financial statements. Recommended format and minimum content for an entity's financial statements. |
|
|
IFRS 5 |
NCA held for sale and discontinued operations. Presentation requirements for P/L when an activity is discontinued during period. |
|
|
IAS 8 |
Accounting polocies, changes in accounting estimates, errors. Ensures entities choose policies that provide useful information in financial performance and position. |
|
|
IAS 34 |
Interim financial statements. Principles to be followed when a period is shorter than a financial year. |
|
|
Complete set of financial statements |
1. Statement of financial position 2. Statement of profit or loss and other comprehensive income 3. Statement of cash flows 4. Statement of changes in equity 5. Accounting policies notes and explanations |
|
|
IAS 1 Asset Recognition |
1. Realised within 12 months of reporting date 2. Held for trading 3. Realised/consumed during the entity's normal trading cycle |
|
|
IAS 1 liability recognition |
1. Helf for trading 2. Settled within entity's normal trading cycle 3. Settled within 12 months of reporting date |
|
|
IAS 1 OCI definition |
Income and expenses recognised outside of P/L as required by IFRS standards |
|
|
IAS 1 TCI definition |
Total of entity's P/L and OCI for period |
|
|
IAS 1 requires that OCI is classified in two groups as follows: |
1. Items that may be reclassified to P/L in subsequent yrs Eg. Foreign exchange gains or losses Effective parts of cash flow hedging arrangements Remeasurement of investments in debt instruments that are classified as FV through OCI 2. Items that will jot be reclassified Eg. Changes in reval surplus Remeasurement components on defined benefit plans Remeasurement of investments in equity instruments that are classified as FV through OCI |
|
|
Does IAS 1 state to disclose income tax relating to each component? And how? |
Yes. Each components net tax or Each components before tax effect and total tax |
|
|
IAS 1 how should changes in equity be presented |
All changes in equity arising due to owners should be separate from non owners Eg Issues of shares Dividends |
|
|
Criticisms of OCI |
1. Usually ignored 2. Reclassification of OCI to P/L means theyll be recorded in a diff period and contradicts definition of income and expenses in conceptual framework |
|
|
IFRS 5 criteria for held for sale and doscontinued operation |
1. Available for sale immediately in current condition 2. Highly probably sale within 12 months 3. At reasonable asking price 4. Actively marketed 5. Unlikely the plan will change 6. Management commited to sale |
|
|
Criticisms of conceptual framework |
1. Accounting is based on historic information 2. Policy choices eg PPE cost vs reval. 3. Clutter from disclosures (some may be generic) 4. Estimates eg. Provisions, accruals, depreciation 5. Unrecognised assets/liabilities wg. Internally generated goodwill - may be integral to business 6. Subjective judgements eg. Limits comparability between entities |
|
|
Relevant/useful info has... |
1. Predictive value 2. Confirmatory value |
|
|
Define Fair Value |
The price that would be received to sell and asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date |
|
|
Fair value valuation levels |
Lvl 1. Quoted prices. Observable inputs in actuive markets for identical items No adjustments required Lvl 2. Observable inputs other than lvl 1. Eg. Similar item in active market or identical item in inactive market Adjustments required Lvl 3. Unobservable inputs based on best info. available. |
