Revised Conceptual Framework for Financial Reporting

This article discusses the revised Conceptual Framework for Financial Reporting, which provides guidance on measurement, presentation, recognition, and disclosure of financial information. It covers the objective of General Purpose Financial Reporting (GPFR), qualitative characteristics of financial information, and the cost constraint on useful financial reporting. The article also explores the elements of financial statements and the changes made in the new framework. It is a valuable resource for understanding the principles and concepts underlying financial accounting.

Running head: FINANCIAL ACCOUNTING
Financial Accounting
Name of the Student:
Name of the University:
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Table of Contents
Introduction................................................................................................................................4
Discussion..................................................................................................................................5
Objective of GPFR.................................................................................................................5
Qualitative Characteristics.....................................................................................................5
Relevance...........................................................................................................................6
Materiality..........................................................................................................................6
Faithful representation.......................................................................................................6
Comparability.....................................................................................................................7
Verifiability........................................................................................................................7
Timeliness..........................................................................................................................7
Understand ability..............................................................................................................7
Applying the enhancing qualitative characteristics............................................................7
The cost constraint on useful financial reporting...............................................................8
Financial Reporting................................................................................................................8
Objective and scope of financial statements......................................................................8
Reporting period.................................................................................................................8
Perspective adopted in financial statements and going concern assumption.....................9
The reporting entity............................................................................................................9
Consolidated and unconsolidated financial statements......................................................9
Elements of Financial Statement............................................................................................9
An asset:.............................................................................................................................9

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Liability............................................................................................................................10
Equity...............................................................................................................................10
Income..............................................................................................................................11
Expense............................................................................................................................11
Recognition of the elements of financial statements........................................................12
Measurement....................................................................................................................13
Presentation and Disclosure.................................................................................................14

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Introduction
Recently the International Accounting Standards Board (IASB) in the year 2018
prescribed the revised Conceptual Framework for Financial Reporting'. The revised
framework defined the different elements of balance sheet. The amendment guided with new
way of measurement, presentation, recognition including the disclosure. The amendment
covered that was till now not been covered. It highlighted the key concern that was to be dealt
as it would short fall in the upcoming time. The main purpose of the framework is to provide
assistance to IASB in order to revise the International Financial Reporting Standards as these
are based on the consistent concepts. The amendment would help in preparing consistency in
the polices of accounting this would provide assistance to the user of the fiscal report in
interpreting the right meaning of the standard. In case where there is no application of
Standard or other criteria that is applicable to a particular transaction. It is the duty of the
management to apply the applicable standard so that the information available becomes
reliable as well as relevant. The amendment of Conceptual framework covers eight specific
parts that would be discussed in the later part of this essay.

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Discussion
Objective of GPFR
The prime objective of GPFR is still helpful to the capable investors, borrowers as
well as other creditors termed as users at the time of decision framing so that an entity can be
financed by means of holding the debt instrument or equity. The users apply their right for
voting on or else manipulates the management. The affect is seen in the resources of the
entity. The amendment in this area has abled the user to assesses the stewardship of the
economic resources that are under the right of an entity. This was the request of wide range of
users. IASB pointed out that the stewardship prevailed earlier too but due to the unambiguous
relevance made it to be marked out from the objective. The base of assessment of users for
their returns rely on the timing, figure, uncertainty that prevails in regard to net cash flow of
the entity in the upcoming time. Secondly, Organisation’s stewardship of the unit’s capitals.
Qualitative Characteristics
The information that is being useful as well as relevant for the users is being
highlighted in this area. Though the amendments in 2010 did not flawlessly cleared the
ambiguity. In the recent amendments board has tried to being transparency in the concepts
related to prudence, measurement of the doubtfulness present in the information (Bohušová
2014).
• Prudence - the Board detected, throughout its outreach procedure, that managers recognise
‘prudence’ to mean unlike belongings, and the elimination of the perception after the 2010
Conceptual Framework had led to additional misperception between managers. The Board
have faith in that prudence back up impartiality of evidence and so defines prudence as ‘the
exercise of carefulness when creating decisions below the circumstances of uncertainty’.

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• Measurement uncertainty – in the reviewed Conceptual Framework, the Board recognised
that dimension uncertainty is an issue that can disturb authentic image. For example, in
particular cases, pertinent evidence might have an in elevation side by side of dimension
uncertainty that might decrease its utility. To some extent less appropriate evidence by a
lesser measurement indecision might be desirable in such belongings.
Relevance
Applicable financial material is proficient of constructing a modification in the
pronouncements completed by manipulators. Financial material is proficient of
manufacturing a variance in choices if it has analytical value, assenting value, or both. The
analytical value as well as assenting value of fiscal material are interconnected.
Materiality
Materiality is a unit-explicit characteristic of significance constructed on the nature or
scale or both of the materials to that the evidence relays in the situation of a single unit's
monetary report.
Faithful representation
GFPR characterise monetary phenomena in arguments and statistics. To be beneficial,
monetary evidence necessity not simply be applicable, it essential also characterise
authentically the phenomena it imports to characterise. Authentic illustration means
illustration of the element of a monetary phenomenon as an alternative of demonstration of its
permissible procedure merely(Bohušová 2014).
Comparability, verifiability, timeliness and understand ability are qualitative
characteristics that improve the helpfulness of evidence that is applicable and authentically
signified.

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Comparability
Information about a reporting entity is more useful if it can be compared with a
similar information about other entities and with similar information about the same entity for
one more period or alternative date. Comparability allows managers to recognise and
comprehend comparisons in, and variances between, matters.
Verifiability
Verifiability supports to guarantee managers that evidence characterises authentically
the financial phenomena it significances to characterise. Verifiability means that dissimilar
well-informed and autonomous witnesses could spread agreement, though not unavoidably
comprehensive arrangement, that a precise representation is an authentic depiction.
Timeliness
Timeliness incomes that material is obtainable to choice-producers in period to be
proficient of prompting their results.
Understandability
Categorising, characterizing and offering evidence obviously and briefly types it
comprehensible. Though certain phenomena are integrally multifaceted and cannot be
complete informal to comprehend, to eliminate such material would brand fiscal reports
imperfect and possibly deceptive.
Nature of Changes in Conceptual Framework
There have been significant changes made in the conceptual framework by the IASB
during 2018 which is mainly because certain aspects were not appropriately covered in
previous framework. Some of the major changes which have been brought about by the board
is related to the measurement which are done for financial information. In addition to this,
definitions for assets and liabilities of the business also changed due to the amendment which

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was made by IASB. The amendment also clearly provided for clarifications in important
areas, such as the roles of stewardship, prudence and measurement uncertainty in financial
reporting.
The amendments which are brought about by IASB aims at improving the overall
reporting structure which is followed by the management of the company. It is anticipated
that the new amendment would enhance the quality of reporting framework and would
provide better quality of financial reports to the users of the financial statements.
The cost constraint on useful financial reporting
Price is a universal restraint on the evidence that can be providing by GPFR.
Reporting such info carry out charges and those prices should be acceptable by the
reimbursements of reporting that data. The IASB measures charges and reimbursements in
relative to monetary reporting usually, and not uniquely in relative to separable reporting
units. The IASB will consider whether diverse scopes of units and additional influences
explain dissimilar reporting necessities in assured circumstances (Bohušová 2014).
Further, in the 2010 Conceptual Framework, the idea of material ended form was not
emphasised as a distinct module of realistic depiction that commanded some managers to
ponder that the perception was no extended applicable. Though, this was not the Panel’s
purpose, so the reviewed Conceptual Framework re-establishes an obvious situation to the
requirement to authentically characterise the material of the singularities that it implications
to represent.
Financial Reporting
Objective and scope of financial statements
The objective of financial statements is to deliver data about a unit's assets, liabilities,
equity, income as well as expenses that is convenient to monetary statements managers in

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evaluating the predictions for upcoming net cash inflows to the unit and in evaluating
organisation's stewardship of the unit's capitals. This data is given in the declaration of
monetary situation and the declaration(s) of monetary outcome as well as in other
declarations and transcripts.
Reporting period
Monetary declarations are organised for an identified phase of time as well as deliver
relative material and under assured situations advance-observing evidence.
The reporting entity
A reporting unit is a unit that is compulsory, or selects, to formulate monetary
statements. It can be a particular unit or a share of a unit or be able to include above one unit.
A reporting unit is not essentially a lawful unit.
Formative the suitable border of a reporting unit is determined by the data
requirements of the prime managers of the reporting unit’s monetary statements.
Elements of Financial Statement
An asset:
Previously defined
The resources that has been controlled by a company as of an outcome of the past
events that generates monetary benefit in the upcoming time to the company. An economic
resources is that resource that is being controlled by a company to get economic advantage.
The new definition states and bring transparency an asset is being an economic
resource to a company it belong. There is no requirement for a company to except the cash
flow as an economic benefit as they are no longer required to be certain or uniformly
probable. This case might affect the measurement as well as recognition of an asset.

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Liability
Previous definition
The current obligations of a company that has been raised due to the events occurred
in the past. The outcome of that cash flow that has been raised from the past events
generating economic advantage.
Current definition
A current obligation of the unit to transferring a monetary resource as an outcome of
previous proceedings. An obligation is a sense of duty of accountability that the unit
possesses and in practical sense that cannot be avoided (Gebhardt, Mora and Wagenhofer
2014).
The chief alteration is that the new definition explains that a liability is the
responsibility to handover a financial resource, in addition not the decisive discharge of
monetary reimbursements. The discharge also no extended requirements to be ‘expected’,
comparable to the alteration in the description of an asset, overhead. The Board too presented
the perception of ‘no everyday capability to avoid’ to the description of a responsibility, and
influences used to evaluate this will be determined by on the environment of a unit’s
responsibility or accountability, which needs the usage of verdict.
Equity
Equity is the outstanding concern in the assets of the unit subsequently subtracting altogether
its liabilities.
Income
Income is growth in monetary reimbursements throughout the bookkeeping period in
the procedure of entries or improvements of assets or reductions of liabilities that is the

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outcome in rise in equity, additional than those connecting to assistances as of equity
contributors.
Expense
Expenses are reductions in monetary reimbursements throughout the secretarial
period in the procedure of discharges or reductions of assets or incurrences of liabilities that
outcome in reductions in equity, additional than those concerning to allocations to equity
contributors.
The explanation of income incorporates equally revenue as well as gains. Revenue
rises in the development of the normal actions of a unit in addition it is mentioned to by a
variability of dissimilar designations together with auctions, dues, interest, bonuses, royalties
as well as rent payment. Gains characterize additional substances that come across the
description of proceeds and might or might not, rise in the development of the normal events
of a unit. Gains symbolise growth in monetary reimbursements besides as such are no unlike
in nature as of income. Henceforward, they are not observed as establishing a discrete
component in the IFRS Framework.
The definition of expenditures includes fatalities and those expenditures that rises in
the development of the everyday actions of the unit. Expenditures that rise in the
development of the regular actions of the unit comprise, for instance, cost of auctions,
salaries as well as devaluation. They regularly take the procedure of a discharge or reduction
of possessions such as cash and cash equivalents, PPE, inventory (Gebhardt, Mora and
Wagenhofer 2014). Damages characterise other substances that meet the definition of
expenditures and might or might not, sit down in the development of the regular actions of
the unit. Damages characterise declines in economic reimbursements as well as such they are

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no diverse in nature from other expenditures. Henceforward, they are not observed as a
discrete component in this Agenda.
The above definitions show that significant changes have been brought about in the
definition of the terms such as assets, liabilities, revenue and expenses of the business. This
shows that the concepts of certain terms are changed so that a clear meaning of the terms can
be established by the businesses while they are reporting for the same. The users of the
financial statements also need to have appropriate knowledge for the changes which have
been made in the new conceptual framework. As there is change in the definition of assets,
the reports which are prepared would now be more transparent considering the treatment of
the assets of the business. Similar the reporting for the liabilities would also be impacted as
there has been amendments in this definition as well. The definition makes it clear that
liabilities create an obligation over the businesses which they cannot avoid and therefore
needs to be reported appropriately in the financial statements of the business.
Recognition of the elements of financial statements
Recognition is the development of including in either balance sheet or income statement
an element that come across the explanation of a component in addition pleases the
subsequent measures for acknowledgement:
 It is credible that any upcoming financial advantage related with the article will
movement to or after the component; and
 The entry's price or worth can be stately with dependability.
As per the above mentioned criteria
An asset is acknowledged in the balance sheet as soon as it is likely that the upcoming
monetary reimbursements would flow to the unit as well as the asset has a price or worth that
could be restrained consistently.

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A liability is acknowledged in the balance sheet as and when it is credible that an
outflow of capitals symbolising financial paybacks would outcome from the payment of a
current responsibility as well as the sum at that the payment would take place can be
restrained dependably.
Income is acknowledged in the income statement at the time of an upsurge in
upcoming financial reimbursements connected to an upsurge in an asset or a reduction of a
liability has risen that can be restrained consistently. The income are shown in the income
statements of the business needs to be appropriate This incomes, in consequence, that
acknowledgement of revenue occurs concurrently with the acknowledgement of growth in
assets or reductions in liabilities for instance, the net growth in assets rising on a sale of
properties or facilities or the reduction in liabilities arising from the relinquishment of a debt
outstanding.
Expenses are acknowledged when a reduction in upcoming financial reimbursements
connected to a reduction in an asset or an upsurge of a liability has ascended that can be
restrained dependably. This means, in result, that acknowledgement of expenditures occurs
concurrently through the acknowledgement of a growth in liabilities or a reduction in assets
for instance, the increase of employee rights or the devaluation of tools.
Measurement
Measurement includes allocating financial quantities at which the components of the
financial declarations are to be documented as well as described.
The IFRS Framework recognizes that a variability of measurement centres are recycled today
to altered gradations and in fluctuating groupings in financial declarations, together with:
 Historic cost
 Present cost

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 Net attainable payment price
 Current price reduced
Historic cost is the measurement base that is normally used nowadays, but then again it is
frequently collective by additional measurement bases. The IFRS Framework sort out not
take account of perceptions or philosophies for choosing that measurement base ought to be
used for specific basics of monetary declarations or in specific conditions. Separate values
and understandings do offer this direction (Gebhardt, Mora and Wagenhofer 2014).
Present cost measures be responsible for fiscal evidence about components, by means
of evidence rationalised to imitate circumstances by the side of the measurement day.
Measurement bases might comprise fair price, cost in use, completion price as well as present
cost. The explanation of fair price in the studied Conceptual Framework is in line through
IFRS 13 Fair Value Measurement, as well as the explanations of cost in use in addition to
completion cost are consequent from IAS 36 Impairment of Assets.
Choice of a measurement basis – reliable by way of the previous sections, the features to be
well-thought-out in choosing a measurement base are in mark through the qualitative
appearances of beneficial evidence - significance as well as authentic illustration:
Significance of evidence delivered by a measurement basis is exaggerated by the
features of the asset or liability, as well as involvement to upcoming cash flows. Authentic
depiction of evidence on condition that through a measurement base is pretentious by
measurement contradiction as well as measurement ambiguity As soon as choosing a
measurement base, the unit require also to reflect the nature of the evidence – whether it
would be offered in the declaration of monetary position as well as/or the declaration(s) of
monetary presentation. Cost would also compel the choice of a measurement base. The Board
recognises that reflection of wholly these features is probable to outcome in the collection of

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dissimilar quantity bases for dissimilar assets, liabilities, revenue and expenditures
(Dart.deloitte.com. 2019)
Presentation and Disclosure
A stability is necessary between:
 Providing entities the litheness to be responsible for applicable evidence that
authentically signifies the unit’s assets, liabilities, equity, revenue and expenditures;
in addition
 Necessitating data that is equivalent, together on or after time to time along with
through entities (Dart.deloitte.com. 2019)
Operative announcement in monetary declarations is too maintained by allowing for the
subsequent two principles:
1. Entity-particular data is additional valuable than consistent explanations; For
instance, it remains of no worth to give or take that income in agreement with IFRS
15 is acknowledged when regulator is reassigned. Though, as long as the period of
this transmission in bright of the action and characteristic predetermined preparations
of the object would be additional valuable.
2. Repetition of evidence in dissimilar portions of the monetary declarations is
frequently redundant as well as could make financial declarations less reasonable.
Though, in incomparable conditions the IASB might agree that substances ascending
from a modification in the present price of an asset or liability are to be comprised in other
complete income, if exclusive of them from the declaration of profit or loss improves
significance as well as transports a supplementary true depiction. Though, objects slowly on a
past charge base might not be documented in other complete income. This smears to financial

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appliances that are apprehended to pull together and sell underneath IFRS 9, anywhere the
portion consistent to interest revenue is comprised in the declaration of profit or loss.
For additional comprehensive income, an additional principle explains that these components
essentially be again classified into the declaration of profit or loss.
Though an exception might be on condition that as of this principle if, for instance, there is
no vibrant base for classifying the period in that reprocessing to income or forfeiture would
improve the significance and accurate depiction of the data in that declaration
(Dart.deloitte.com.2019).
Note that at the moment, the essentials of OCI that cannot be reprocessed in P&L are:
Re measurement alterations on fixed assets,
Re measurements or actual gains as well as losses on well-defined advantage strategies as
well as reasonable price modifications to the individual recognition danger for liabilities
acknowledged at reasonable value in profit or loss.
Classification
The majority of the section is dedicated to the sorting of assets and liabilities, equity
besides lastly proceeds as well as expenditures. The perception of monetary presentation, that
is not well-defined, is lectured over and done with the cataloguing of proceeds and
expenditures in either:
 The declaration of profit or loss, or
 Other comprehensive income (OCI).
The report of profit or loss is the prime foundation of evidence about fiscal presentation.

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It consequently trails that, in opinion, all revenue as well as expenditures for the time are
predictable in the announcement of profit or loss ( Murphy and O’Connell 2013).

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Conclusion
Distant from transforming the IFRS background, the new Conceptual Framework
explains, redefines besides adds to the current form, re-investigative the disagreement in the
nimble of the important physical characteristics of the monetary reports along with cost-
advantage restraints.
In passing, the IASB has:
Attended to the investors as well as reinstated, although in dissimilar procedure, the
perceptions of far-sightedness, stewardship, and material over procedure, while presenting
the perception of commercial actions to be occupied into explanation when choosing a
dimension basis;
Disconnected the explanation of the components of the monetary reports from the
acknowledgement standards;
Established the expansion of its thoughtful by transporting the notion of regulator into streak
with the explanation in current ethics, and by eliminating prospect from the
acknowledgement principles, so that this perception currently only initiates into production in
measurement parts;
Explained that the financial declarations must be recognised from the viewpoint of the entity;
Exposed two mythologies: that of ‘filled fair value’, by emerging measurement values based
on a assorted measurement perfect, as well as that of evaporation of the declaration of income
or loss, by authorising that it is the key basis of material for measuring the entity’s monetary
presentation.

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