1. Advanced Financial Accounting FIN-611
Mian Ahmad Farhan
Lecture-26
IASB Frame-Work

2. Financial Statements Balance sheet Income statement
Statement of changes in equity
Cash-flow statement
Notes

3. Financial Statements Balance sheet Financial position Income statement
Financial performance or Profit / Loss
Statement of changes in equity
Movement In different heads of owner’s equity
Cash-flow statement
Movement in cash inflow and cash outflow
Notes
Significant accounting policies and explanatory notes

4. Qualitative Check Materiality Relevancy Reliability Comparability
Understanding
Qualitative characteristics that make financial information useful
Qualitative characteristics that make financial presentation useful

5. Relevancy The financial statement are relevant for decision making
Purpose for the use of financial statement.
Values to be relevant
Predictive value
Confirmative value

6. Five Characteristics of Reliability
Faithful representation
Substance over form
Neutralability
Prudence
Completeness

7. Constraints / Limitations relating to Relevancy & Reliability
Timeliness
Balance between the benefit and cost
Balance among the different characteristics

8. Types of Financial Information
Assets
Liabilities
Owner’s equity
Incomes
Expenses

9. Assets Assets are resources Arising from past event
Probability of inflow of economic benefit to the entity in future

10. Liabilities
A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

11. Important points
Present obligation
Arises/Result from past event

12. Owner’s Equity
It is the residual interest in the assets after deducting all its liabilities. In other words, equity is what is left when all liabilities have been settled.

13. Income Revenue Gain Sale of goods Sale of services
Return on investment
Gain
By selling its assets at an amount which is greater than
book value.
By settlement of its liabilities at an amount that is lesser
than its book value.

14. Income
Income is the increase in economic benefits during the accounting period, in the form of inflows of assets, enhancement of assets or decreases in liabilities, that results in an increase in equity. Other than those relating to contribution from equity participation.

15. Expenses
Expenses is the decrease in economic benefits during the accounting period, in the form of outflows, depletion of assets or increase in liabilities, that results in an decrease in equity. Other than those relating to contribution / distribution from equity participation.

16. General Recognition Criteria
An item should be recognized in the Financial statements if:
It means one of the definitions of element;
It is probable that any future economic benefit, associated with the item will flow to or from the entity (for example, Income is recognized when a Sales is made, not when an order is received).
The item has a cost or value that can be measured with reliability.

17. Four Bases of Financial Instrument Measurement
Historical cost
Current cost
Realizable value
Present value

18. Capital Maintenance Financial capital maintenance
Physical capital maintenance

19. Capital Maintenance Financial capital maintenance
Physical capital maintenance