1. Objective of General Purpose Financial Reporting
To provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions relating to providing resources to the entity.
2. Qualitative Characteristics of Useful Financial Information
Fundamental Qualitative
- Relevance: Information that is capable of making a difference in decisions (Predictive and Confirmatory value).
- Faithful Representation: Information must be complete, neutral, and free from error.
Enhancing Qualitative Characteristics
- Comparability: Consistently applied over time and across entities.
- Verifiability: Different observers could reach a consensus.
- Timeliness: Available in time to influence decisions.
- Understandability: Classified and presented clearly.
3. Elements of Financial Statements
| Element | Definition |
| Asset | A present economic resource controlled by the entity as a result of past events. |
| Liability | A present obligation of the entity to transfer an economic resource as a result of past events. |
| Equity | The residual interest in the assets of the entity after deducting all its liabilities. |
| Income | Increases in assets or decreases in liabilities that result in increases in equity. |
| Expenses | Decreases in assets or increases in liabilities that result in decreases in equity. |
4. Recognition and Derecognition
Recognition: Capturing an item in the financial statements if it meets the definition of an element and provides useful information (relevant and faithful).
Derecognition: Removing an asset or liability when the entity loses control of the asset or has no further obligation for the liability.
5. Measurement Bases
- Historical Cost: Based on the transaction price at the date of acquisition.
- Current Value:
- Fair Value: Exit price (IFRS 13).
- Value in Use: Present value of future cash flows.
- Current Cost: Cost to replace the asset today.