MGT401 Highlighted Handouts by Mr Shahbaz

Chapter – 1 · IASB Conceptual Framework · Sr. No · Chapter outline - Topics

IASB Conceptual Framework for Financial Reporting Objective of General Purpose Financial Statement Financial Statements & Reporting Entity Elements of Financial Statements Elements of Financial Statements-Practice Recognition of the Elements De-recognition of the Elements Measurement of the Elements of Financial Statements Measurement-Historical Cost Measurement-Fair Value Measurement-Value in Use Measurement-Current Cost Selection of Measurement Basis Measurement-Basis Practice

Accounting Framework in Pakistan-I Accounting Framework in Pakistan-II

Topic Videos 001-017 are mandatory part of this chapter/module

Topic 1 – IASB Conceptual Framework for Financial Reporting

The International Accounting Standard Board (IASB) framework describes the objective of, and the concepts for, general-purpose financial reporting. The IASB framework is not a standard, and nothing in the framework overrides any standard or any requirement which the standards contain. The Conceptual Framework describes the objectives of and concepts for the general purpose financial

Its purposes are: ❑ to assist the International Accounting Standards Board (IASB) to develop IFRS Standards that are based on consistent concepts; ❑ to assist the IASB in promoting harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRSs; ❑ to assist national standard-setting bodies in developing national standards; ❑ to assist preparers of financial statements in applying IFRSs and in dealing with topics that have yet to form the subject of an IFRS; ❑ to assist users of financial statements in interpreting the information contained in financial statements prepared in compliance with IFRSs; The Conceptual Framework is divided into eight chapters, namely: ❑ The objective of general purpose financial reporting; ❑ The qualitative characteristics of useful financial information; ❑ Financial statements and the reporting entity; ❑ The elements of financial statements; ❑ Recognition process and criteria and derecognition; ❑ Measurement of the elements from which financial statements are constructed; ❑ Presentation and disclosure; and ❑ Concepts of capital and capital maintenance. This Conceptual Framework is not an IFRS and nothing in the Conceptual Framework overrides any specific IFRS. On very rare occasions there may be a conflict between the Conceptual Framework and an IFRS. In those cases, the requirements of the IFRS prevail over those of the Conceptual Framework.

Topic 2 – Objective of General Purpose Financial Statement

To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity. General-purpose financial statements provide information about the financial position of an entity, its resources and claims against those resources. Information is provided about the strengths and weaknesses of an entity and its ability to acquire finance. General-purpose financial statements also provide information about changes in an entity’s economic resources and claims that result in entity’s financial performance. Financial performance is assessed both through the process of accrual accounting and changes in cash flows.