Describes the objective of, and the concepts for, general

Conceptual Framework
purpose financial reporting.

The objective of __________ is to provide financial

information about the reporting entity that is useful to existing
General Purpose Financial Reporting
and potential investors, lenders and other creditors in making
decisions relating to providing resources to the entity.

Fundamental qualitative characteristics (2) 1. Relevance 2. Faithful representation

__________ financial information is capable of making a

difference in the decisions made by users. Information may be
capable of making a difference in a decision even if some users Relevant
choose not to take advantage of it or are already aware of it
from other sources.

Ingredients of relevance (2) 1. Predictive value 2. Confirmatory value

Financial information has __________ if it can be used as an
input to processes employed by users to predict future Predictive Value
outcomes.

Financial information has __________ if it provides feedback

Confirmatory Value
about (confirms or changes) previous evaluations.

Information is __________ if omitting, misstating or obscuring

it could reasonably be expected to influence decisions that the
primary users of general purpose financial reports (see Material
paragraph 1.5) make on the basis of those reports, which
provide financial information about a specific reporting entity.

Is the concept that financial statements be produced that

Faithful Representation
accurately reflect the condition of a business.
Characteristics of faithfully represented financial statements
1. Completeness 2. Neutral 3. Free from error
(3)

A __________ depiction includes all information necessary for

a user to understand the phenomenon being depicted, Complete
including all necessary descriptions and explanations.

A __________ depiction is without bias in the selection or

presentation of financial information. A __________ depiction
is not slanted, weighted, emphasised, deemphasised or
Neutral
otherwise manipulated to increase the probability that
financial information will be received favourably or
unfavourably by users.

__________ is the exercise of caution when making

judgements under conditions of uncertainty. The exercise of
Prudence
__________ means that assets and income are not overstated
and liabilities and expenses are not understated.
 __________ means there are no errors or omissions in the
description of the phenomenon, and the process used to
produce the reported information has been selected and Free from Error
applied with no errors in the process. In this context,
__________ does not mean perfectly accurate in all respects.

1. Comparability 2. Verifiability 3. Timeliness 4.

Enhancing qualitative characteristics (4)
Understandability
__________ is the qualitative characteristic that enables users
to identify and understand similarities in, and differences Comparability
among, items.

__________ helps assure users that information faithfully

represents the economic phenomena it purports to represent.
__________ means that different knowledgeable and
Verifiability
independent observers could reach consensus, although not
necessarily complete agreement, that a particular depiction is
a faithful representation.

__________ means having information available to decision-

Timeliness
makers in time to be capable of influencing their decisions.

Classifying, characterising and presenting information clearly

Understandable
and concisely makes it __________.

__________ is a pervasive constraint on the information that

can be provided by financial reporting. Reporting financial
information imposes __________, and it is important that Cost
those __________ are justified by the benefits of reporting
that information.

__________ provide information about economic resources of

the reporting entity, claims against the entity, and changes in Financial Statements
those resources and claims,

1. Financial position 2. Comprehensive income 3. Cash flows 4.

Types of financial statements (5)
Changes in equity 5. Notes to financial statements

Presents the financial position (condition) of the entity at a

Statement of Financial Position
given date
Reports entity's financial performance in terms of net profit or
Statement of Comprehensive Income
loss over a specified period
Presents the movement in cash and bank balances over a
Statement of Cash Flows
period

Details the movement in shareholders’ equity over a period Statement of Changes in Equity

Presents disclosures relevant to the other financial statements Notes to Financial Statements
 1. Going concern 2. Accounting entity 3. Time period or
Underlying assumptions (4)
periodicity 4. Monetary unit

The _________ principle is the assumption that an entity will

remain in business for the foreseeable future. Conversely, this
means the entity will not be forced to halt operations and
liquidate its assets in the near term at what may be very low
fire-sale prices. By making this assumption, the accountant is Going Concern Assumption
justified in deferring the recognition of certain expenses until a
later period, when the entity will presumably still be in
business and using its assets in the most effective manner
possible.

__________ asserts that the business is separate from the

owners, managers, and employees who constitute the
Accounting Entity Assumption
business. Therefore transactions of the said individuals should
not be included as transactions of the business.

__________ states that the life of a business can be divided

into equal time periods. These time periods are known as
accounting periods for which companies prepare their Time Period Assumption
financial statements to be used by various internal and
external parties.
The __________ is an accounting principle that assumes
business transactions or events can be measured and
Monetary Unit Assumption
expressed in terms of monetary units and the monetary units
are stable and dependable.
Aspects of monetary unit assumption (2) 1. Quantifiability of Peso 2. Stability of Peso
__________ meaning that the elements of the financial
statements should be stated under one unit of measure which Quantifiability of Peso
is the Philippine Peso.

__________ means that there is still an assumption that the

purchasing power of the peso is stable or constant and that Stability of Peso
instability is insignificant and therefore ignored.

__________ provide information about the assets, liabilities,

equity, income and expenses of both the parent and its Consolidated Financial Statements
subsidiaries as a single reporting entity.
Elements of financial statements (5) 1. Asset 2. Liability 3. Equity 4. Income 5. Expense
A present economic resource (or right that has the potential to
produce economic benefits)controlled by the entity as a result Asset
of past events.
A present obligation of the entity to transfer an economic
Liability
resource as a result of past events.
The residual interest in the assets of the entity after deducting
Equity
all its liabilities.
 ncreases in assets, or decreases in liabilities, that result in
increases in equity, other than those relating to contributions Income
from holders of equity claims.
Decreases in assets, or increases in liabilities, that result in
decreases in equity, other than those relating to distributions Expense
to holders of equity claims.
Economic resource Asset
Claims Liability & Equity
Changes in economic resources and claims, reflecting financial
Income & Expense
performance

1. Contributions from holders of equity claims, and

Other changes in economic resources and claims (2) distributions to them 2. Exchanges of assets or liabilities that
do not result in increases or decreases in equity

__________ is the process of capturing for inclusion in the

statement of financial position or the statement(s) of financial
performance an item that meets the definition of one of the Recognition
elements of financial statements—an asset, a liability, equity,
income or expenses.

1. It is probable that any future economic benefit associated

with the item will flow to or from the enterprise; and 2. The
Criteria for recognition (2)
item's cost or value can be measured with reliability.

__________ involves assigning monetary amounts at which

the elements of the financial statements are to be recognized Measurement
and reported.

__________ is a measure of value used in accounting in which

the price of an asset on the balance sheet is based on its Historical Cost
nominal or original cost when acquired by the company.

__________ is the cost that would be required to replace an

asset in the current period. This derivation would include the
Current Cost
cost of manufacturing a product with the work methods,
materials, and specifications currently in use.

__________ is the value of an asset that can be realized upon

the sale of the asset, less a reasonable estimate of the costs
Net Realizable Value (NRV)
associated with either the eventual sale or the disposal of the
asset in question.

__________ is the current value of a future sum of money or

Present Value
stream of cash flows given a specified rate of return.

__________ concept of capital is one whereby capital is linked

Financial
to the net assets or equity of a company.
__________ concept of capital is where capital is linked to the Physical
productive capacity of the entity.
Under this concept, a profit is earned only if the financial (or
money) amount of the net assets at the end of the of the
period exceeds the financial (or money) amount of the net
Financial Capital Maintenance
assets at the beginning of the period, after excluding any
distributions to, and contributions from, owners during the
period.

Under this concept, a profit is earned only if the physical

productive capacity (or operating capability) of the enterprise
(or the resources need to achieve that capacity) at the end of
Physical Capital Maintenance
the period exceeds the physical productive capacity at the
beginning of the period, after excluding any distributions to,
and contributions from, owners during the period.