The the effects of past, present and future

The Conceptual framework aims to
produce useful information such that it sets out the concepts that underlie the
preparation and presentation of financial statements. The Framework is a
foundation on which accounting standards are based that will provide a general
purpose to financial reporting. The ISAB underpins the production of financial accounts
and harmonises regulations and accounting standards in order to provide
information that is useful in making economic decisions.

Financial reporting is focused on
providing financial information that is useful to present to investors and
creditors in making decisions. The attributes that will make the information
useful to the above future investor in a listed company will rely on two
qualitative characteristics where usefulness is set at two levels: fundamental
and enhancing qualitative characteristics. Fundamental characteristics support
useful information in such that they are relevant and faithfully represented.
Having relevance in making positive difference to decisions has predictive and
confirmatory value in such that it will help the investor to evaluate the
effects of past, present and future transactions as well as confirming previous
evaluations. This has a real connection to the faithful representation of the
economic phenomena it represents where the information is complete, neutral and
free from error. This will allow the user to gain a reasonable understanding
where the numbers, words and explanations are unbiased but capable of making a
difference without distortion and being free from material error. The enhancing
qualitative characteristics (defined in the first phase of the joint conceptual
framework) are comparability, verifiability, timeliness and understandability. Comparability
is about identifying similarities and differences between two sets of entities
where relationships can be established so that for example investors are able
to decide if they are able to provide resources to a company. Verifiability assures
that the information represents the economic phenomena where an appropriate
measurement method is applied without being bias. The information should be
available to decision-makers where it will augment the capacity by evaluating
trends in making investment or credit decisions. Understandability is enhanced
when the information is presented clearly, concisely, classified and
characterised. However the actual comprehension of the financial information
will largely depend on whether the investor has reasonable knowledge of
economic and business activities and is able to analyse the information with
diligence. Accrual accounting and the going concern convention are the two
assumptions underlying financial statements. Under the accrual basis, the
statements provide information about past transactions making it useful to make
economic decisions. The fundamental going concern assumption takes note that
the entity continues business in the foreseeable future without the need to
liquidate. It is therefore important to note that on this basis, the entity
will be able to realise its assets and discharge its liabilities. 

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