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Objective of Financial Statements To provide information about: 1. The Financial Position 2. Performance and 3.

Changes in Financial Position of an enterprise (e.g: cashflow that is useful to a wide range of users in making economic decisions) Underlying Assumption 1. Accrual basis 2. Going concern Qualitative Characteristics of Financial Statement The attributes that make the information provided in Financial Statements useful to others. Primary qualitative characteristics Recognition of the elements of relating to content. Financial Statements RELEVANCE When it influences the economic and Depiction of the element in words decisions of users by helping them by monetary amount and the inclusion evaluate past, of that amount in Primary qualitative the financial present, future statementby events or totals. characteristics relating to presentation. confirming, or 1. Initial recognition correcting their COMPARABILITY past 2. Subsequent recognition Users must be able to evaluations. 3. Derecognition compare the financial RELIABILITY statements of an When it is free enterprise over time from material to identify trends in its error and bias financial position and and can be performance.

IASB FRAMEWORK FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS Measurement of the Elements of Elements of Financial Statements Financial 1. Statements Asset- resource controlled by enterprise as a result of past events and from which future economic benefits Historical cost- assets recorded at actual amount paid or are expected to flow to the enterprise. 2. fair value of consideration Liabilities- entitys obligation to transfer economic benefits as a result of past transactions or events. 3. Current cost- assets are carried at amount required to Equity- residual amount found by deducting all acquired the now from value) liabilities of thementity(Entryall of the entitys assets. 4. Income- increases in economic benefits during the Realisable value- exit form accounting period in thevalue of inflow or enhancements ofassets are decreases the present that Present value- assets or carried at in liabilities result in increases in equity, other than those relating discounted future net cash inflow and liabilities at NPV of to contributions from equity participants. 5. net cash outflow. Expenses- decreases in economic benefits during the accounting period in thee form of outflows or depletions of assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to equity participants. Concepts of Capital and Capital Maintenance Financial capital maintenance Profit is only earned if the financial or money amount of net assets at the end exceeds the net assets at the beginning. Physical capital maintenance Profit is only earned if the physical productive capacity at the end exceeds the physical productive capacity at the beginning (Current Cost Accounting)