IABS: International Accounting Standard Boards details

FRA, Standard 0

  • Qualitative characteristics of financial statement
  • Specify required reporting elements 

Objective 

  • Provide financial information that is useful in making deciding to providing resources to an entity. Resources provider includes 
    • Investors 
    • Lenders 
    • Other creditors 
  • Information includes: 
    • Firm’s performance 
    • Financial position 
    • Cash flow 

Qualitative Characteristics 

  • Two most important fundamental characteristics 
    • Relevance:  information in them can influence users’ economic decision or affect user’s evaluation on past events or forecast of future predictions. Should have: predictive value and confirmatory value
    • Faithful representation: complete, neutral, free from error 
  • 4 other characteristics
    • Comparability: format should be consistent among firms and across period 
    • Verifiability: Independent observers
    • Timeliness: 
    • Understandability: 
  • Required reporting Elements including:
    • Assets: Resource a result of past transactions to provide future economic benefits 
    • Liabilities: Obligation that require a future outflow of economic resource 
    • Owners equity: Owner residual interest in the asset after deducting the liabilities 
    • Income: 
      • Increase in assets
      • Decreasing liabilities in a way increasing owner’s equity 
    • Expense
      • Decrease in economics benefits
      • Increasing liability in a way decreasing owner’s equity 
    • Measurement base reported in financial statement elements: 
      • Historical cost: amount originally paid for the asset 
      • Amortized cost: historical cost adjusted for depreciation, amortization, depletion, impairment
      • Current cost: amount to pay today for the same asset 
      • Net realizable value: selling price – selling cost 
      • Present value: Discounted value of the asset’s expected future cash-flow.
      • Fair value: The price at which an asset could be sold
  • Constraints and Assumptions
    • Constraints:
      • Benefits/cost: 
        • Benefit of gaining the information is greater than the cost of presenting it
      • Difficulty  of capturing non-quantifiable information 
        • Info about the company is not captured directly in the financial statement 
    • Assumption
      • Accrual accounting: Financial statement should reflect transaction when it actually occurs, not when it is paid.  
      • Going concern: 
        • Company will continue to exist for the foreseeable future.