Private project - Shiro - Finance

The beginning of international standards can be traced back to the 60s. Since the 60s, much effort has gone toward building international financial standards, which facilitates a uniform accounting approach for top European companies. Comment by PlagScan: Possible source: http://connect.mheducation.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_characteristics_of_financial_reporting_information.htm

In 2002, the use of International Financial Reporting Standards (IFRS) has been a must for financial reporting since January 2005. From 2005, companies whose securities are admitted to carrying out trade in a regulated market of any member state must prepare their consolidated accounts according to IFRS. This regulation has brought about changes in accounting for companies, as previously applied local standards of IFRS brought a more dynamic accounting approach. This paper analyses the key features of financial accounting concerning IFRS with regard to underlying accounting theory (Alfredson, 2007). Comment by PlagScan: Possible source: http://www.accurateessays.com/samples/report-to-ifrs-2/

The international standards aimed to minimise reporting costs, which were rising due to internationalisation processes. According to the increasing number of associate companies that operate abroad, an increasing need for the standards recognised across the border became apparent. Internationally adopted standards offer advantages to investors that can provide a comparison of companies that were reported before through different standards. The use of a uniform accounting approach helps in having a cross-border comparison, and this results in an allocation of capital in European active markets, which is better (International Accounting Standards Board [IASB] & International Accounting Standards Committee Foundation [IASCF], 2007). Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://accounting.smartpros.com/x62587.xml http://www.iasplus.com/en/standards/other/framework http://www.accurateessays.com/samples/report-to-ifrs-2/ Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a

In the beginning of the process of harmonisation of the accounting standards, Europe signed a treaty in 1957, creating the European Economic Community.

In the following years, there were other bodies that participated with the harmonisation project, such as Financial Accounting Standards (FAS) and the European Accounting Federation (EAF). A key step to achieving multinational standards was made in 1995 with an agreement between IOSCO and IASC, with the aim of developing the main

standards that could be applied for cross-border offerings. The European Commission also supported this agreement.

A number of international institutions have been in place. These international institutions have made an impact on the process of harmonisation in the European Union. The most notable impact has been by the IASB. Representatives of a number of accountancy bodies, aiming to develop reliable standards for use internationally, started IASC in 1973. The IASC Board promulgated a substantial standards body, interpretations and conceptual framework (International Accounting Standards Board & International Accounting Standards Committee Foundation., 2007). Comment by PlagScan: Possible sources: http://www.iasplus.com/en/standards/other/framework http://www.fasb.org/project/cf_phase-a.shtml

IASC objectives, according to the IASC Foundation Constitution, are the development of understandable, quality and global accounting standards; the promotion of the use of these accounting standards; considering the needs of small and medium-sized enterprises and developing economies; and convergence of international accounting standards and the IFRS and IASC to quality solutions.

In later years, IASC partnered with the International Organization of Securities Commissions (IOSC) aiming to create accounting standards that can be applied on the global stock exchange. In April 2001, IASC left the responsibility for IAS to IASB and their aim to achieve being an independent non-governmental organisation. IASB was begun as part of the IASC foundation.

The development of the capital market saw the need for more comparable accounting standards. In the past, the world top standards had too many disharmonies, thus it was difficult for investors to perform comparisons of financial accounts between different organisations that applied diverse accounting standards. European organisations with their securities admitted in the US market had to prepare their accounts based on Generally Accepted Accounting Principles (GAAP) standards. Having two types of annual accounts raised the cost of financial reporting. In 2002, the top setters of which are the IASB and the American Financial Accounting Standards Board (AFASB), gave a memorandum of understanding, which was a major step toward their commitment to the convergence.

The commitment was aimed at adopting high-quality solutions to the current and coming accounting standards. The convergence project was in two stages. The first one is the short-term stage, the objective of which is to propose changes to the IFRS and the GAAP that will show in how both the common and harmonised solutions are removing or lowering the remaining differences.

The two boards updated their agreement in February, 2006. A memorandum of understanding was then published. This memorandum of understanding was to affirm the shared objective of creating common accounting standards of high quality that would be used in global capital markets. The memorandum further elaborates on the objectives and standards that were described in the memorandum published in 2002. The new memorandum has a goal of identifying the remaining differences by 2008 and finding a common solution to those differences.

Thus, it was hoped that in the future, there would be an elimination of key differences between IFRS and GAAP. In the second convergence stage, there was the issuance of the revised standards for the combination of businesses. The key differences were then eliminated and now the standards are conformable. Based on an IASB announcement, there were to be no key standards prior to 2009. Major changes in the IFRS became effective from July, 2009.

Financial statements are a representation of a company’s financial position as well as performance. The main objective of financial statements is to give information on the financial position, performance and cash flow of an organisation used by different individuals or entities in making financial decisions. The financial statements also give the outcome of the stewardship of the management of the organisation’s resources entrusted to it (Wilson, 2006). Comment by PlagScan: Possible source: http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf Comment by PlagScan: Possible source: http://www.anna-n-lee.com/files/Chap_20_-_Accounting_Changes_and_Error_Corrections.pdf

To achieve the objective, financial statements offer information on an organisation’s assets, liabilities, income, expenses, equity, cash flow, and contributions of the members by their distributions. This information is important to financial statement users in predicting an organisation’s cash flow, specifically regarding their certainty and timing.

Basic accounting theories are held together using the conceptual framework of accounting. The part of the Financial Accounting Standards Board’s Statements of Financial Accounting Concepts of the conceptual framework provides the objectives of business financial reporting. By having an understanding of how some basic accounting theories work in the conceptual framework, theoretical foundations of financial accounting principles and rules can be determined. Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290 Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290 Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290

The purpose underlying the theory of financial accounting and reporting is that the information represented in financial statements ought to give useful information for making economic and business decisions. This is because financial accounting has a purpose that is linked to making economic and business decisions. Financial accounting is a process that is more focused externally than most business owners know. The theory that financial reporting ought to offer more information that is useful in decision making also recognises that reporting goes along with legal, economic, social and political environments where there is reporting (Wilson, 2006). That is, the theory recognises the necessity of flexibility to allow change as the environment changes. Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html http://connect.mheducation.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_characteristics_of_financial_reporting_information.htm https://www.scribd.com/doc/37277284/Fasb-Conceptual-Framework http://wenku.baidu.com/view/668c58bffd0a79563c1e7251.html http://www.termpaperwarehouse.com/essay-on/Summary/44401

Fair presentation and observance with IFRS

Fair presentation means that the presentation of the impact of transactions, other activities and conditions follow the definition and recognition principles of liabilities, assets, income and expenses in the IFRS framework. Comment by PlagScan: Possible source: http://www.iasplus.com/en/standards/other/framework

Financial statements are prepared in such a way that they satisfy the information needs of statement users. To be able to meet the needs best, there is a financial reporting framework that is applied in consideration of the jurisdiction in which the organisation or its users exist. In reference to the nature of reporting frameworks, there are two types. That is, the fair presentation framework and the compliance framework.

The fair presentation framework requires that there should be compliance with earlier frameworks but additionally acknowledges that to achieve a fair presentation, management may have to disclose information not specifically needed by the framework. In addition, in some extreme uncommon cases, it may be necessary to move away from the framework requirements to achieve a fair presentation of the financial position and performance in the financial statements of an entity. Comment by PlagScan: Possible source: http://www.vista360llc.com/pdf/ADV_Part_2_Perspective_2010-11.pdf Comment by PlagScan: Possible sources: http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://connect.mheducation.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_characteristics_of_financial_reporting_information.htm http://www.anna-n-lee.com/files/Chap_20_-_Accounting_Changes_and_Error_Corrections.pdf https://www.askives.com/what-are-the-qualitative-characteristics-of-the-financial-statements.html http://www.csupomona.edu/~aysalimi/acc312mt2.doc

A fair presentation requires compliance; however, it still allows for other options that can attain a better presentation of the financial statements. Allowing other options results in more reliable and relevant financial statements, even in cases where management has to go beyond and against the framework. Whereas in the compliance framework, alternatives are not allowed, full compliance is needed under any condition (Wilson, 2006).

In the preparation of financial statements, individuals preparing financial statements should inform users on the financial reporting framework applied. Additionally, in case of a departure, when a fair presentation framework is applied, there should be disclosure with the required prominence so that the users can comprehend and also give reasons as to why it was necessary to have departure and the manner in which the alternative treatment the management adopted produced more reliable and relevant financial statements.

Financial statements are presented on the basis of going concern, unless there is an intention by the management to liquidate the organisation, to cease business operations or it has no other alternative but to do so.

With the accrual basis of accounting, according to this feature, an organisation recognises assets, liabilities, income, expenses and equity when they fulfil the definition and recognition principles of the elements in the framework of IFRS. Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.anna-n-lee.com/files/Chap_20_-_Accounting_Changes_and_Error_Corrections.pdf http://analystnotes.com/cfa-study-notes-describe-the-international-accounting-standards-boards-conceptual-framework-including-the-objective-and-qualitative-characteristics-of-financial-statements-required-reporting-elements-and-constraints-and-assumptions-in-preparing-f.html

Material and aggregation refers to similar material items that have to be presented separately. Items that are different in nature or function are to be presented separately unless these items are irrelevant.

Offsetting is not allowed in IFRS. However, some principles require offsetting following fulfilment of specific condition.

It is a requirement of the IFRS that at least per year a complete set of financial statements is presented. Nevertheless, companies that are listed also publish interim financial statements, of which presentation complies with the IAS 34 interim financial reporting.

It is a requirement of the IFRS that organisations make a presentation of comparative information in respect to the previous period for all amounts in the financial statements in the present period. Additionally, comparative information must be in narrative and descriptive form, if it is needed for the comprehension of the financial statements of the current period. In addition, the IAS standard requires a statement of the organisation’s financial statements following an application of an accounting policy, retrospectively, or if items in the financial statements are retrospectively restated or following reclassification of items on the financial statement of an organisation. Comment by PlagScan: Possible source: http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf Comment by PlagScan: Possible sources: http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf http://www.anna-n-lee.com/files/Chap_20_-_Accounting_Changes_and_Error_Corrections.pdf http://www.csupomona.edu/~aysalimi/acc312mt2.doc Comment by PlagScan: Possible sources: http://www.anna-n-lee.com/files/Chap_20_-_Accounting_Changes_and_Error_Corrections.pdf http://www.csupomona.edu/~aysalimi/acc312mt2.doc

It is required by the IFRS that items in the financial statements should be presented and classified in a consistent manner from one financial period to the other. This should happen unless it is apparent that following an important change, the organisation’s nature of operations or the organisation has its financial statements reviewed, that other classifications and presentations would be more appropriate regarding the standard for the selection and application of accounting policies in IAS, or if there is a necessary change in presentation by an IFRS standard.

There have been radical changes that IFRS has brought in accounting for corporate reporting. The major difference was the bringing about of an accounting approach that is more dynamic with the impact of the fair value approach. The principles associated with the earlier valuation approach were in the fourth directive (Wilson, 2006). The basis of the general valuation was the historical costs, although it could permit the use of replacement costs as well.

The IFRS states the main accounting principles as follows: the accrual basis of accounting; the transaction impacts are recognised once they happen and not when cash or the equivalent of cash is paid or received and they are reported in the related period of financial statements. On the principle of going concern, it is presumed by the financial statement that a business with indefinite operations, and if this presumption is invalid, then there is a need for disclosure and another reporting basis should be adopted.

Based on the accrual basis of accounting, financial statement users are informed on the previous and future events that will happen. The accrual basis of accounting is applied for all financial statements except in the cash flow statement. Individuals preparing financial statements must adhere to the principle of going concern, since the process of valuation of assets and liabilities is different when the organisation will not go on with its activities. Comment by PlagScan: Possible source: http://analystnotes.com/cfa-study-notes-describe-the-international-accounting-standards-boards-conceptual-framework-including-the-objective-and-qualitative-characteristics-of-financial-statements-required-reporting-elements-and-constraints-and-assumptions-in-preparing-f.html

Qualitative characteristics of financial accounting are the attributes that make the financial information offered in the financial statements useful to its users. It is stated by the IASB ED Conceptual Framework for Financial Reporting (2008) that the Objective of Financial Reporting and the Qualitative Characteristics and constraints of Decision-Useful Financial Reporting Information, financial information should have two important qualitative characteristics. These are relevance and faithful representation. It is also described in the ED regarding improving the qualitative characteristics. The enhancement of qualitative characteristics differentiates useful information from the less useful information. Qualitative characteristics enhance the usefulness of decisions made about the information reported in financial statements represented faithfully. Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://www.iasplus.com/en/projects/completed/framework/framework-a https://www.askives.com/what-are-the-qualitative-characteristics-of-the-financial-statements.html http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/EDMay08/Pages/Frequently-Asked-Questions.aspx Comment by PlagScan: Possible sources: http://www.antiessays.com/free-essays/Qualitative-Characteristics-Of-Financial-Reporting-222614.html http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf https://www.askives.com/what-are-the-qualitative-characteristics-of-the-financial-statements.html Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://www.iasplus.com/en/standards/other/framework http://www.iasplus.com/en/projects/completed/framework/framework-a http://www.pcfr.org/downloads/09_08_Meeting_Materials/Conceptual_Framework.doc http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/Supplement_86_GL_IFRS.pdf https://www.askives.com/what-are-the-qualitative-characteristics-of-the-financial-statements.html Comment by PlagScan: Possible sources: http://www.iasplus.com/en/projects/completed/framework/framework-a http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://accounting.smartpros.com/x62587.xml http://www.pcfr.org/downloads/09_08_Meeting_Materials/Conceptual_Framework.doc http://www.fasb.org/project/cf_phase-a.shtml http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/Supplement_86_GL_IFRS.pdf Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://accounting.smartpros.com/x62587.xml http://www.iasplus.com/en/projects/completed/framework/framework-a http://www.pcfr.org/downloads/09_08_Meeting_Materials/Conceptual_Framework.doc http://www.fasb.org/project/cf_phase-a.shtml Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://accounting.smartpros.com/x62587.xml http://connect.mheducation.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_characteristics_of_financial_reporting_information.htm http://www.pcfr.org/downloads/09_08_Meeting_Materials/Conceptual_Framework.doc http://www.ukessays.com/essays/accounting/qualitative-characteristics-and-constraints-of-decision-useful-financial-reporting-information-accounting-essay.php http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/Supplement_86_GL_IFRS.pdf http://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/EDMay08/Pages/Frequently-Asked-Questions.aspx

The following qualitative characteristics must be present, according to IFRS: understanding, relevance, reliability and comparability. Understanding requires that information being presented in the financial statement be that which can be understood. The information must also be relevant. Information can be said to be relevant if it can influence economic decisions. Reliability of financial information is achieved if the information is free from any material errors and bias. The information must faithfully represent events and transactions. Comparability means that the financial information can be compared over time with that of other different entities. Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.antiessays.com/free-essays/Qualitative-Characteristics-Of-Financial-Reporting-222614.html Comment by PlagScan: Possible sources: http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://www.ukessays.com/essays/accounting/qualitative-characteristics-and-constraints-of-decision-useful-financial-reporting-information-accounting-essay.php Comment by PlagScan: Possible sources: http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://www.ukessays.com/essays/accounting/qualitative-characteristics-and-constraints-of-decision-useful-financial-reporting-information-accounting-essay.php

Some qualitative characteristics are fundamental such as relevance, completeness, neutrality and faithful representation.

Relevant information has the capacity of making a difference to the users of financial statements. The relevant information carries predictive value, which means it helps in evaluating the likely effects of past, present or future transactions or other events about future cash flow, also on the confirmatory value (International Accounting Standards Board, 2007). Comment by PlagScan: Possible sources: http://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/Supplement_86_GL_IFRS.pdf http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html

Financial reporting information must have a faithful representation characteristic. The information on the financial statement must be a representation of the economic occurrence that it claims to represent. Faithful representation is achieved following the depiction of an economic occurrence that is neutral, complete and free from any material error. Information that shows a faithful representation of economic occurrence shows the economic material of the underlying transaction, circumstance or event, which is not similar to the legal form of the information. One economic occurrence can be represented in a number of ways. For instance, it may be represented qualitatively or quantitatively. In addition, one depiction of financial information can be a representation of several economic occurrences (Alfredson, 2007). Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.ukessays.com/essays/accounting/qualitative-characteristics-and-constraints-of-decision-useful-financial-reporting-information-accounting-essay.php Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html https://www.scribd.com/doc/37277284/Fasb-Conceptual-Framework http://wenku.baidu.com/view/668c58bffd0a79563c1e7251.html http://www.termpaperwarehouse.com/essay-on/Summary/44401

A depiction of a phenomenon is termed as complete if it has all the information required for a faithful representation of the economic information it claims to represent. Having an omission can render some information untrue or misleading, making it not useful to financial report users. Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx

Neutrality means there is no bias. There should be bias in financial reporting. Biasness is created to induce a certain behaviour. Neutral information gives a faithful representation of an economic occurrence. Neutral information does not attempt to decorate the image it communicates to influence the behaviour of users in a certain direction. However, financial information being neutral does not mean that it should not have purpose or it should not be influential. On the contrary, financial information that is relevant ought to have the capacity to influence users’ decisions. Comment by PlagScan: Possible sources: http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.bdointernational.com/Services/Audit/IFRS/Comment-Letters-on-IFRS-Standard-Setting/Pages/IASB-Exposure-Draft-An-improved-Conceptual-Framework-for-Financial-Reporting-Chapter-1-and-Chapter-2.aspx http://www.pcfr.org/downloads/09_08_Meeting_Materials/Conceptual_Framework.doc http://www.ukessays.com/essays/accounting/qualitative-characteristics-and-constraints-of-decision-useful-financial-reporting-information-accounting-essay.php Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html Comment by PlagScan: Possible sources: http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html

This is the quality that helps users of financial information to identify the similarities and the differences between two economic phenomena sets. Consistency is the application of the same accounting procedures and policies, either from one period to another, in an organisation or in one period across organisations. Comparability is the goal, while comparability refers to a means to an end of aiding in the achievement of that goal. Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting Comment by PlagScan: Possible source: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046

If information on an organisation can be compared with information on another organisation, or the same information on the same organisation in the same period or another period, then that information becomes more useful. Comparability is a quality, which is a relationship between items of information (Alfredson, 2007).

Verifiability is a quality that helps to assure users of faithful representation of financial information of economic phenomena that the information purports to represent. By information being verifiable, it implies that observers with diverse knowledge and who are independent can reach a consensus, even if it is not a complete agreement (International Accounting Standards Board, 2007). The consensus should be either that the information is a representation of the economic phenomena that it claims to represent with no bias or material error, or there is a correct measurement technique or recognition that has been applied with no bias or material error. Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html https://www.scribd.com/doc/37277284/Fasb-Conceptual-Framework Comment by PlagScan: Possible sources: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html https://www.scribd.com/doc/37277284/Fasb-Conceptual-Framework http://wenku.baidu.com/view/668c58bffd0a79563c1e7251.html http://www.termpaperwarehouse.com/essay-on/Summary/44401 Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.slideshare.net/MRicky/the-fasbs-conceptual-framework-for-financial-reporting-a http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://de.slideshare.net/MRicky/fasbcfcomment-1290 http://accohome.blogspot.com/2010/10/qualitative-characteristics-part-3.html http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html http://connect.mheducation.com/sites/0077328787/student_view0/ebook/chapter1/chbody1/qualitative_characteristics_of_financial_reporting_information.htm https://www.scribd.com/doc/37277284/Fasb-Conceptual-Framework http://wenku.baidu.com/view/668c58bffd0a79563c1e7251.html http://www.termpaperwarehouse.com/essay-on/Summary/44401 Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.financialexecutives.org/eweb/upload/FEI/Summary of FASB PV document.pdf http://accohome.blogspot.com/2010/10/conceptual-framework-for-financial.html

There are two constrains that are offered by financial reporting. These are the materiality and cost financial constraints. Comment by PlagScan: Possible source: http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting

Materiality

Information is termed as material if its omission or its misstatement can influence the decision of the users, based on the financial information of an organisation. Materiality is dependent on nature and the amount of things that are judged in a specific instance of its omission or misstatement. Therefore, it is impossible to be specific on the level at which a certain type of information can become material (International Accounting Standards Board, 2007). In the consideration of whether some financial information faithfully represents what it claims to represent, it is vital to consider the materiality as material misstatement or omission always resulting in biased, incomplete, and erroneous information. Comment by PlagScan: Possible source: http://www.bafu.admin.ch/emissionshandel/05556/05558/index.html?lang=en&download=NHzLpZeg7t,lnp6I0NTU042l2Z6ln1ad1IZn4Z2qZpnO2Yuq2Z6gpJCGen57fGym162epYbg2c_JjKbNoKSn6A-- Comment by PlagScan: Possible source: http://www.bafu.admin.ch/emissionshandel/05556/05558/index.html?lang=en&download=NHzLpZeg7t,lnp6I0NTU042l2Z6ln1ad1IZn4Z2qZpnO2Yuq2Z6gpJCGen57fGym162epYbg2c_JjKbNoKSn6A--

Cost

There are costs imposed by financial reporting and this cost should be justified by the benefits reaped from financial reporting. The assessment of whether the benefits reaped justify the costs imposed is usually more qualitative than quantitative. Moreover, the qualitative assessment of these benefits and costs is usually not complete. The costs that are incurred in providing financial information are cost incurred in collecting and processing information, cost of verifying information, and the cost incurred in disseminating information. Users also incur the costs of analysing and interpreting information. There are also some costs imposed in case of omission of information that is useful in making decisions; these include the costs incurred by users as they try to access or estimate incomplete information in the financial report. Comment by PlagScan: Possible source: http://www.iasplus.com/en/standards/other/framework Comment by PlagScan: Possible source: http://www.iasplus.com/en/standards/other/framework Comment by PlagScan: Possible source: http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf Comment by PlagScan: Possible sources: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046 http://www.slideshare.net/MRicky/preliminary-views-conceptual-framework-for-financial-reporting http://www.ifrs.org/Meetings/MeetingDocs/IASB/Archive/Conceptual-Framework/Previous Work/CF-0506b06.pdf http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf Comment by PlagScan: Possible source: http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf Comment by PlagScan: Possible source: http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch04.pdf

Previously, many diverse standards for financial reporting were being used. In that case, the different standards gave different results, since their recognition criteria and following measurements were not uniform. As the capital market increased in significance, there was an increased need for standards that were harmonised. The Directive of the European Commission IFRS was used as the top standard in the European Union in 2002. Since then, there was a key step toward the harmonisation of the accounting standards. In 2002, there was the signing of an agreement by IASB and FASB to harmonise IFRS and GAAP. Comment by PlagScan: Possible sources: http://services.bepress.com/cgi/viewcontent.cgi?article=1124&context=itfa http://www.thehindubusinessline.com/features/taxation-and-accounts/tax-disallowances-on-markedtomarket-loss/article4130463.ece http://www.gujaratuniversity.org.in/web/NWD/Downloads/OldPapers/List of Question Papers/M-Phil/9_2003_Mar_Apr/MPhil-Accountancy-II AB3378AB.pdf http://www.thehindubusinessline.com/todays-paper/tp-economy/drafts-of-tax-accounting-standard-on-construction-contracts-government-grants-issued/article2546808.ece http://www.ukibc.com/doing-business-in-india/news_and_media/news/draftsoftax.aspx

The theory that financial reporting ought to offer more information that is useful in decision making also recognises that reporting goes along with legal, economic, social and political environments that companies run, and also where there is reporting. That is, the theory recognises the importance of having flexibility to allow change as the environment changes (Alexander, Britton & Jorissen, 2007).

IFRS AND ACCOUNTING THEORIES

Conceptual accounting framework provides that financial information must be reliable, relevant, consistent and comparable. Having standard accounting rules and requirements provides these accounting characteristics. Accounting theories are operational on four assumptions: the economic entity assumption, going concern assumption, monetary unit assumption and periodicity assumption (International Accounting Standards Board, 2007). According to the economic entity assumption, the business activities are separate from the activities of the owner. According to the going concern assumption, in the preparation of financial statements, it should be assumed that the business would continue indefinitely with no bankruptcy or case of dissolution. If the preparer is not sure of this assumption because of the poor performance of the business, it is required by GAAP that the financial statements reflect the company’s holdings on a liquidation basis. According to the monetary unit assumption, users of financial information ought to dominate financial statements in the form of numerical currency that is relevant to the company and not units of products. And the periodicity assumption divides the business activities into fiscal periods, which have recurring financial reporting on a monthly or yearly basis. The accounting principles need adherence to the matching principles and historical costs. The principle of historical cost provides that assets should be at the historical buying cost. Comment by PlagScan: Possible source: http://www.slideshare.net/saimachaudhary5661/conceptual-framework-15045046

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Alexander, D., Britton, A., & Jorissen, A. (2007). International Financial Reporting and Analysis. London: Thomson Learning.

Alfredson, K. (2007). Applying International Financial Reporting Standards. Milton, Australia: John Wiley & Sons Australia.

International Accounting Standards Board. (2007). International Financial Reporting Standards (IFRSs) 2007: Including International Accounting Standards (IASs) and Interpretations as at 1 January 2007. London, UK: International Accounting Standards Board.

International Accounting Standards Board & International Accounting Standards Committee Foundation. (2007). Exposure Draft of Proposed Improvements to International Financial Reporting Standards: Comments to be Received by 11 January 2008. London, UK: International Accounting Standards Board.

PricewaterhouseCoopers LLP. (2007). IFRS Manual of Accounting 2008: Global Guide to International Financial Reporting Standards. Surrey: CCH.

Wilson, A. (2006). International GAAP 2007: Generally Accepted Accounting Practice under International Financial Reporting Standards. London, UK: Butterworths.

Alexander, D., Britton, A., & Jorissen, A (2007) International financial reporting and analysis London: Thomson Learning.

Alfredson, K. (2007) Applying international financial reporting standards Milton, Australia: John Wiley & Sons Australia

International Accounting Standards Board (2007) International financial reporting standards (IFRSs) 2007: Including International accounting standards (IASs) and interpretations as at 1 January 2007. London, U.K: International Accounting Standards Board.

International Accounting Standards Board & International Accounting Standards Committee Foundation. (2007). Exposure draft of proposed improvements to international financial reporting standards: Comments to be received by 11 January 2008. London: International Accounting Standards Board.

PricewaterhouseCoopers LLP. (2007). IFRS manual of accounting 2008: Global guide to International financial reporting standards. Surrey: CCH.

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