Hello readers. We saw in the last blog the importance of SBR and the main fragments SBR is divided into. We discussed in detail the first of 6 parts. In case if you have missed the first part, then please click on this “SBR- Part I”.
Today we will discuss the next part.
PART B – THE FINANCIAL REPORTING FRAMEWORK
Financial reporting framework refers to set of criteria used to determine measurement, recognition, presentation, and disclosure of all material items appearing in the financial statements.
Firstly, it covers the purpose, advantages and drawback of an accounting framework. This includes:
- Conceptual framework i.e. a theory of accounting prepared by a standard-setting body which deals with financial reporting issues.
- Discussion of the significance of Conceptual Framework in supporting the production of accounting standards.
- Function of prudence and substance over form in financial reporting.
- Prudence : Not overestimating the revenue or underestimating the expenses
- Substance over form: concept which means taking into consideration the crux of the transaction while recording them in financial statements rather than its legal form.
- Discussion on the purpose of financial reporting and disclosure of material information. This enables appraisal of organisation’s stewardship of the entity’s resources and also the inadequacy of financial reporting.
- Useful financial information and its qualitative characteristics.
- Lower bearing of financial information due to high level of uncertainty.
- Evaluation of decisions made by management in regards to recognition, Derecognition and measurement of elements of financial statement.
- Crucially discussing and applying the definition of the elements of financial statements. Elements of financial statement refers to
- Coverage of the items in the statement of profit or loss and other comprehensive income.
London School Of Business & Certified Accountants (LSBCA) is teaching all subjects of ACCA
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