7. Conceptual framework

1
7. Conceptual framework

• Presentation of
• Financial Information

2

• A witty saying proves nothing.
• - Voltaire (1694-1778)

3
Principles - Presentation

• What is measurement?

• Primary financial statements
• Financial Performance
• Financial Position
• Cash Flows
• Supporting Notes

4
Principles

• Focus of Financial Performance
• components of performance,
• characteristics of components
• Focus of Financial Position
• types and functions of assets and liabilities
• relationships between them
• Cash Flows
• cash generation from activities
• flows from operations and from other activities

5
Principles

• Disclosure from Notes not a substitute for
  recognition
• Notes do not justify omission or
  misrepresentation in primary statements

6
Explanation - Presentation

• Clear and simple communication
• Highly structured and aggregated
• Loss of detail in aggregation and abstraction,
  because
• More effective
• can highlight
• easier to compare
• more understandable

7
Explanation - Presentation

• Focus of financial statements
• Cash generation
• Financial adaptability
• . . . Through
• Financial Performance
• Financial Position
• Cash Flow
• Notes to accounts

8
Explanation - Presentation

• Classification
• Similar items together
• Dissimilar items distinguished
• Classification assist in highlighting
  relationships
• (debtors/sales current assets/current
  liabilities)
• Financial Position
• Cash Flow
• Notes to accounts

9
Explanation - Good Presentation

• Summary of Financial Performance
• Ought to show
• Nature
• Cause
• Function
• Stability
• Risk
• Predictability
• Reliability

10
Explanation - Good Presentation

• Financial Performance (cont)
• Should
• Recognise only gains and losses in performance
  statement
• Classify by function and nature
  (Selling/Admin/Financial)
• Distinguish by product and geography (differently
  affected)
• Identify separately
• Unusual items (by amount or incidence)
• Special characteristics (finance / tax)
• Relate to future (RD)

11
Explanation - Good Presentation

• Financial Performance (cont)
• Gains and Losses are not offset, unless
• Same event
• Gross figures not useful for assess effects of
  transactions

12
Explanation - Good Presentation

• Balance Sheet
• Recognises only assets, liabilities, owners
  equity
• Shows Resource structure (nature, amount,
  liquidity of resources)
• Classes and amounts of assets
• Assets distinguished by functions (trade goods /
  noncurrent items)
• Shows Financial structure (nature, amount, timing
  of obligations)
• classes and amounts of liabilities and equity

13
Explanation - Good Presentation

• Cash Flow Statement
• Sources of cash
• Trading
• Sale of non-current assets
• Application of cash
• Dividends
• Investment
• Retire debt

14
Explanation - Accompanying information

• Non-accounting (and often non-financial)
• Employment disclosures
• Environmental disclosures
• Community activities
• Reviews
• Reports
• Statements (chair)

15
Explanation - Accompanying information

• Accompanying information useful if
• Factors impacting financial performance
• Risks
• Uncertainties
• Trends
• Issues on financial position
• strategies on finance
• treasury policies
• Expenditure impacting the future
• R D
• Advertising

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Explanation - Highlights and summary indicators

• Highlights and summary indicators should not be
  presented so as to exaggerate their importance
• Highlights and summaries useful to users who
• Need only basic information
• Will proceed to analyse further (figures catch
  interest)

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THE END

• . . . There is no more.

18

• You can get more with a kind word and a gun than
  you can with a kind word alone.
• Al Capone (1899-1947)

19

• Copy from one, it's plagiarism
• copy from two, it's research.
• Wilson Mizner (1876-1933)

20

• Manuscript something submitted in haste and
  returned at leisure.
• Oliver Herford (1863-1935)