THEORY OF ACCOUNTS

CONCEPTUAL FRAMEWORK
basis, guidelines & theoretical concepts
NOT a standard
PFRS PAS, PFRS, Interpretations
SCOPE [COQE]
C concepts of capital & capital maintenance

QUALITATIVE CHARACTERISTICS
OLD
NEW
[CURRy]
Fundamental / Primary
C comparability
Relevance
inclusion/ exclusion would have
an effect on the decision of the
users
predictive value
confirmatory value

O objective of financial reporting

Materiality
omission would have an effect on
the decision of the users ; entity
specific relevance

Q qualitative characteristics
E elements of financial reporting
R reporting entity
OBJECTIVE OF FINANCIAL REPORTING

U understandability

Faithful Representation
[CoNe-F]
- transactions should be
presented/recorded as it purports
to be
Co completeness
complete depiction (quantitative)
a) amount b) what the amount
represents/description (qualitative)
Ne neutrality
NO bias
F free from (material) error

R relevance
Ry reliability

Enhancing / Secondary
V verifiability
different knowledgeable parties
will arrive at a consensus that a
part transactions is faithfully
represented
C comparability
(consistency in application)
identify similarities and
differences
Intercomparability
intracomparability
U understandability
clear and concise presentation to
knowledgeable parties (due
diligence in reading)
T timeliness
information losses its usefulness
in time

general purpose financial reports

provide financial information about the reporting entity to
existing and potential investors, lenders, and other creditors
that is useful in decision making
USERS
Primary existing and potential investors, lenders and
creditors [EPIC-L]
Secondary management, government, other regulatory
agencies, general public

FINANCIAL INFORMATION
info regarding the entitys economic resources (assets) and
claims (liabilities)
Financial Information
assess financial position ; Statement of Financial Position
Financial Information about changes in Economic
Resources and claims
performance :
Accrual statement of comprehensive income
Cash statement of cashflows
NOT due to performance statement of changes in equity

substance over form

NADZ

ELEMENTS
Financial Position
Assets
- resources controlled by the entity
- arising from past transactions/events
- expected future economic benefit
Liabilities
- present obligation
- arising from past transactions/events
- expected outflow of future economic benefit
Equity
Performance
- residual interest in assets
Income
after deducting liabilities
- increases / enhancements in
economic benefit
- increase in assets / decrease
in liabilities that result in an
increase in equity other that
contributed from owners
Expenses
- decrease in economic benefit
- decrease in asset / increase in
liabilities that result in a
decrease in equity other than
distribution to owners

UNDERLYING ASSUMPTION
OLD
NEW
Going Concern
Going Concern
Accrual
CONSTRAINT
Cost constraint pervasive constraint

MEASUREMENT BASIS
acquisition cost at date of purchase
past acquisition cost
2) Current Cost
Present acquisition cost
Replacement cost
3) Realizable Value
Present selling price
Fair Value (IFRS 13)
4) Present Value
Discounted Future Cashflows
1) Historical Cost

CONCEPTS of CAPITAL and CAPITAL MAINTENANCE

Capital / Equity determine income/expense
Capital Maintenance Approach
1) Physical Capital Maintenance current cost
2) Financial Capital Maintenance normal

NADZ