Conceptual framework

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Welcome

• Conceptual framework

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• Statement of Principles
• ASB

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• In theory,
• there is no difference
• between theory and practice.
• But, in practice, there is.
• - Jan L.A. van de Snepscheut

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Standards

• Rules of procedure set by an authority.
• Rules can relate to the output of a process.

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Approaches to Standard Setting

• Comprehensive school
• Disjointed incrementalism

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Statement of principles

• The Conceptual framework

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Purpose

• Principles underlying GPFS
• Coherent frame of reference
• Conceptual foundation for accounting standards

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Status

• Not mandated

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Scope

• True and Fair view Financial Statements
• The ultimate test - aimed at the product
• CLASSIFY

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True and Fair

• Evolves (changes in the environment)
• Sufficient in quality and quantity
• Not defined in Principles

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OBJECTIVES generally

• The focus of the
• activity
• project
• product
• Provides a benchmark for judging success

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OBJECTIVES generally

• Engineering
• Management
• Education

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OBJECTIVES of Financial Statements

• PRINCIPLES
• Information
• Useful for making economic decisions
• Useful
• to many
• Measurement

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OBJECTIVES of Financial Statements

• Information
• Financial performance
• Financial position
• Ability to generate cash

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OBJECTIVES of Financial Statements

• For users
• Investors (present and future) - defining class
• Lenders
• Trade creditors
• Employees
• Customers
• Governments and agencies
• Public

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Objectives - Measurement

• Financial Performance
• Stewardship
• Assess cash flows
• Feedback

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Objectives - Measurement

• Financial position
• Resources
• Structures
• Liquidity / solvency
• Risk
• Adaptive ability

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Objectives - Measurement

• Cash Flow
• Liquidity / solvency
• Gains v cash flows
• Adaptive ability (world view)

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Objectives

• Limitations of financial statements
• Limited scope
• Conventionalised representation
• Only on financial effects of transactions
• Historical information (do not predict)

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The end

• If you have enjoyed the lecture, do come again
  next time.

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• Always do right- this will gratify some and
  astonish the rest.
• - Mark Twain (1835-1910)