Transcript Slide 1

4
Conceptual Framework of
Financial Statements
Financial Accounting for Management
CHAPTER OBJECTIVES
Financial Accounting for Management
 Introduction
 Purpose of the Framework
Assistance to:
 Preparers
 Auditors
 Users of Financial Statements
 Accounting Standards Board (ASB)
 Scope and Coverage
 Components of Financial Statements
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Balance Sheet
Statement of Profit and Loss
Cash Flow Statement
Notes to Account and Accounting Policies
Financial Accounting for Management
 Researsh in Financial Reporting
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Case 1: Research in financial reporting Tata Motors Ltd.
Financial Accounting for Management
Financial Accounting for Management
 Objective of Financial Statements
 Financial position
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Economic resources
Financial structure
Liquidity and solvency
 Performance
 Cash flows
 Users and Their Information Needs
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Present and Potential Investors
Employees and their Representative Groups
Lenders
Suppliers and other Trade Creditors
Customers
Governments and their Agencies
Public
Management
Others
Financial Accounting for Management
 Case 2 Reliance Industries Ltd.
Annual Report 2005–06
Financial Accounting for Management
Financial Accounting for Management
 Assumptions Underlying Preparation of Financial
Statements
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Accrual basis
Going concern
Consistency
 Qualitative Characteristics of Financial Statements
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Understandability
Relevance
Materiality
Financial Accounting for Management
 Illustration 1
Financial Accounting for Management
 Reliability
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Faithful representation
Substance over form
Neutrality
Prudence
Completeness
Comparability
 Constraints on qualitative characteristics
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Balance between Timeliness and Reliability
Balance between Benefit and Cost
Balance between Qualitative Characteristics
 True and fair view
Financial Accounting for Management
 Definitions, Characteristics Recognition and
Measurement of the Elements of Financial Statements
 Definitions and Characteristics
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Financial position
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Performance
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Assets
Liabilities
Equity
Income
Expenses
Cash flows
 Recognition
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Process of recognition
Specific Issues
Financial Accounting for Management
 Measurement
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Measurement bases
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Historical cost
Current cost
Realisable value
Present value
 Concepts of Capital and Capital Maintenance
 Capital
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Financial concept
Physical concept
 Capital maintenance and determination of profit
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Financial capital maintenance
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Illustration 2
Physical capital maintenance
Financial Accounting for Management
 Case 3 Infosys Technologies Ltd. (Annual Report 2005–06)
 Concluding Remarks
Financial Accounting for Management