Qualitative Characteristics and Accounting Principles
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Transcript of Qualitative Characteristics and Accounting Principles
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Qualitative characteristics
Accounting concepts
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Useful
Release on a timely
basis
Making a
difference
Has predictive
value, confirmatory
value.
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Complete
All
information
and all
explanations
Neutral
Without bias
Information
must not be
manipulated
Free from error
No errors or
omissions in
the
description
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Able to distinguish between different accounting
policies
Able to make valid comparison of similar items
Disclosure of
accounting
policies
Entities should change accounting policies if
those policies become inappropriate
Not the same as
uniformity
Should be shown
Enable comparison to be made
Corresponding
information
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VERIFIABILITY
Assure users that information faithfully
represents the economic phenomena it
purports to represent
Can be independently verified more
decision-useful
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TIMELINESS
Having information
available to decision-
makers in time
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Information
Classifying
Characterising
Presenting
Clearly
Concisely
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What is business?
Business may be defined in various ways. Its purpose is to
make a profit.
Business is separate from its owner
For accounting treat business as separate from the owners.
The transactions of the owner should not be mixed with the
businesss transactions.
For example, when a sole trader draws money from the
business for personal use.
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1person in business (self-employed)
not limited company
owner personally liable of all liabilities of
business
Sole trader
two or more people in business
share profit/losses
Owners/partners personally liablePartnership
business & owners are separate in laws
have limited liability. Most owners can lose is
amount of their investment in business
Limited
Company
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are expenses charge against profit relate to a particularaccounting period, even though they have not yet been paid
they are recorded in the accounting records and reported inthe financial statements
in computing profit revenue earned must be matched against
expenditure incurred in earning it (matching convention)
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Financial statements are required to give afair presentation or present fairly in all
material respects the financial results of theentity.
Compliance with IFRSs will almost always
achieve this.
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a. Compliance with IFRSsshould be disclosed.
b.
All relevant IFRSs must be followed if compliancewith IFRSs is disclosed.
c.
Useof an inappropriate accounting treatmentcannot be rectified either by disclosure ofaccounting policies or notes/explanatory
material.
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a) Selection and application of accounting
policies.
b
Presentation of information in a mannerwhich provides relevant, reliable,comparable and understandableinformation.
c) Additional disclosures where required.
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To maintain consistency, the presentation andclassification of items in the financial statementsshould stay the same from one period to thenext, except as follows:
(a) There is a significant change in the nature ofthe operation or a review of the financialstatements indicates a more appropriatepresentation.
(b) A change in presentation is required by anIFRS.
