Topics FASB IASB

Presentation Conceptual The conceptual Framework of The IASB has issued this revised
Framework concept No;8 include: concept
 Chapter 1 The objective of  Chap 1 The objective of
general purpose Financial Financial Reporting
Statement  Chap 2 Chap 3
 Chap 3 Qualitative Qualitative
characteristics of useful
characteristics of useful
information.
 Chap4 Elements of
information
Financial Statement.  Chap 3 Financial
 Chap 7 Presentation Statement and reporting
 Chap 8 Notes to Financial entity
Statements  Chap 4 Elements of
 Concept Statement no 7 : Financial Statement.
Using Cash Flow  Chap 5 Recognition and
Information and present derecognition.
value in Accounting  Measurement.
Measurement
 Presentation and
 Concept Statement No;5
Measurement in Financial Disclosure
Statement of Business  Concept of capital and
Enterprise. capital maintenance .

Objective The objective is to provide The objective of general purpose

financial information about the financial reporting is to provide
reporting entity that is useful financial information
to present and potential equity about the reporting entity that is
investors, lenders, and other useful to existing and potential
creditors in making decisions investors, lenders and other
about creditors in making decisions
providing resources to the entity. relating to providing resources to
maintains that financial the entity.
statements must be general General purpose financial reports
purpose in provide information about the
nature rather than geared toward financial position of a reporting
specific needs of a particular user entity, which is information
group, although investors, about the entity’s economic
creditors, and their advisers resources and the claims against
are singled out among external the
users reporting entity. Financial reports
also provide information about
the effects of transactions and
other events that change a
reporting entity’s economic
resources and claims. Both types
of
information provide useful
 input for decisions relating to
providing resources to an
entity.
Qualitative FASB has the same qualitative ● Relevance
characteristics as IFRS Relevant financial information is
Characteristics and capable of making a difference in
Elements the decisions made by users.
Qualitative characteristics : Financial information is capable
of making a difference in
decisions if it has predictive
value,
confirmatory value or both.
Financial information has
predictive value if it can be used
as an
input to processes employed by
users to predict future outcomes.
Financial information has
confirmatory value if it
provides feedback about
(confirms or changes)
previous evaluations

● Faithful representation
Financial reports represent
economic phenomena in words
and numbers. To
be useful, financial information
must not only represent relevant
phenomena,
but it must also faithfully
represent the substance of the
phenomena that it purports to
represent.
To be a perfectly faithful
representation, a depiction would
have three characteristics. It
would be
complete, neutral and free from
error. Of course, perfection is
seldom, if ever, achievable. The
Board’s objective is to maximize
those qualities to the extent
possible.

Enhancing Qualitative
characteristics :

● Comparability
Comparability is the qualitative
characteristic that enables users
to identify and understand
similarities in, and differences
among, items. Unlike the other
qualitative characteristics,
comparability does not relate
to a single item. A comparison
requires at least two items.

● Verifiability
Verifiability helps assure users
that information faithfully
represents the economic
phenomena it
purports to represent.
Verifiability means that different
knowledgeable and independent
observers could reach consensus,
although not necessarily
complete agreement, that a
particular
depiction is a faithful
representation.
● Timelines
Timeliness means having
information available to decision-
makers in time to be capable of
influencing their decisions.
Generally, the older the
information is the less useful it
is. However,
some information may continue
to be timely long after the end of
a reporting period because, for
example, some users may need to
identify and assess trends.
● Understandability
Classifying, characterizing and
presenting information clearly
and concisely makes it
understandable. Some
phenomena are inherently
complex and cannot be made
easy to
understand. Excluding
information about those
phenomena from financial
reports might make
the information in those financial
reports easier to understand.
 However, those reports would be
incomplete and therefore
possibly misleading.
Elements: 1. Assets The elements of financial
2. Liabilities statements defined in the
3. Equity Conceptual Framework are:
4. Investment by Owners (i) assets, liabilities and equity,
5. Distribution to Owner which relate to a reporting
6. Comprehensive Income entity’s
7. Revenue financial position; and
8. Expenses (ii) income and expenses, which
9. Gains relate to a reporting entity’s
10. Losses financial performance.
Recognition Recognition Criteria satisfied Recognition Criteria satisfied
1 Definition of elements of 1 Relevance
Financial Statement 2 Faithful Representation
2 Measurability
3 Relevance
4 Reliable