1. Copyright© Dorling Kindersley India Pvt Ltd Financial Accounting for Management 4 Conceptual Framework of Financial Statements

2. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd CHAPTER OBJECTIVES

3. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Introduction  Purpose of the Framework Assistance to: Preparers Auditors Users of Financial Statements Accounting Standards Board (ASB)  Scope and Coverage  Components of Financial Statements  Balance Sheet  Statement of Profit and Loss  Cash Flow Statement  Notes to Account and Accounting Policies

4. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd Researsh in Financial Reporting  Case 1: Research in financial reporting Tata Motors Ltd.

5. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd

6. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Objective of Financial Statements Financial position  Economic resources  Financial structure  Liquidity and solvency Performance Cash flows  Users and Their Information Needs  Present and Potential Investors  Employees and their Representative Groups  Lenders  Suppliers and other Trade Creditors  Customers  Governments and their Agencies  Public  Management  Others

7. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Case 2 Reliance Industries Ltd. Annual Report 2005–06

8. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd

9. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Assumptions Underlying Preparation of Financial Statements  Accrual basis  Going concern  Consistency  Qualitative Characteristics of Financial Statements  Understandability  Relevance  Materiality

10. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Illustration 1

11. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Reliability  Faithful representation  Substance over form  Neutrality  Prudence  Completeness  Comparability Constraints on qualitative characteristics  Balance between Timeliness and Reliability  Balance between Benefit and Cost  Balance between Qualitative Characteristics True and fair view

12. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd  Definitions, Characteristics Recognition and Measurement of the Elements of Financial Statements Definitions and Characteristics  Financial position Assets Liabilities Equity  Performance Income Expenses  Cash flows Recognition  Process of recognition  Specific Issues

13. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd Measurement  Measurement bases Historical cost Current cost Realisable value Present value  Concepts of Capital and Capital Maintenance Capital  Financial concept  Physical concept Capital maintenance and determination of profit  Financial capital maintenance Illustration 2  Physical capital maintenance

14. Financial Accounting for Management Copyright© Dorling Kindersley India Pvt Ltd Case 3 Infosys Technologies Ltd. (Annual Report 2005–06)  Concluding Remarks