MUSINGS

This Conceptual Framework for General Purpose Financial Reporting (Conceptual Framework) has been approved for issue by the Accounting Standards Board (Board), the body which has as its principal function to set generally recognised accounting practice.

The IASB bases its financial reporting standards on the conceptual framework that it adopted in 2010. The conceptual framework was developed by IASB and it lays down the basic concepts and principles that act as the foundation for preparation and presentation of the financial statements. The framework is also used as guide to develop / improve standards and to resolve any accounting conflicts. Note that the conceptual framework is not an accounting standard in itself and cannot be used as an alternative to the financial reporting standards applicable in your country. The IFRS framework addresses the following: Objectives of financial statements Underlying assumptions of the financial statements Qualitative characteristics of financial statements Elements of financial statements Recognition of the elements of financial statements Measurement of the elements of financial statements Objectives of the Financial Statements In very simple words, the objective of Financial Statements is: “To ...

Comprehensive Income vs. Other Comprehensive Income: An Overview In  financial accounting , corporate income can be broken down in a multitude of ways, and firms have some latitude on how and when to recognize and report their earnings. To compensate for this, the  Financial Accounting Standards Board  (FASB) has firms collect and report information using certain universally recognized measurements to help provide perspective for investors and analysts and report them on  financial statements . Two such measurements are comprehensive income and  other comprehensive income . Obviously, they sound (almost) like the same thing. Let us examine how they differ. Other Comprehensive Income We will start with other comprehensive income (OCI), for reasons that will become clear later on. Also known as comprehensive earnings, this is a catch-all classification for the items that cannot be included in typical profit and loss calculations because they do not stem from the c...

Use the following four categories of activities to classify cash transactions: Operating Noncapital financing Capital and related financing Investing Generally, cash receipts and cash payments are reported as gross rather than net. Two exceptions to the gross reporting are: Cash purchases and sales of cash and cash equivalents Assets and liabilities for which the turnover is quick and the maturities are three months or less (such as debt, loans receivable and the purchase and sale of highly liquid investments) Cash Flows from Operating Activities Cash flows from operating activities result from providing services and producing and delivering goods. They include all other transactions not defined as noncapital financing, capital and related financing or investing activities. The operating activities section is, in a sense, a “catch-all” category. Cash  inflows  (proceeds) from operating activities include: Cash ...

What is the Carrying Amount? The carrying amount is the value of an asset as reflected in a company’s book or  balance sheet , minus the depreciation value of the asset. It is also called book value and is not necessarily the same as an asset’s  fair value  or market value. Carrying Amount vs. Market Value Carrying amount and market value differ in many ways, as listed below: Carrying amount is the value of an asset as it appears on the balance sheet and is acquired, after deducting its depreciation value and impairment expenses. The market value of an asset, on the other hand, depends on  supply and demand , where if the demand is high, its value increases and if the demand is low, its value decreases. Carrying amount is based on the gradual  depreciation  of the value of a certain asset, which means that its value will change and decline through time. Market value is the value given to an asset when it is being sold in the open market. ...