Question

1. There are many information that might be useful for users of financial statements. How- ever, the information are not always mandated in the form of accounting standard.

   A. Should all the accounting information be mandated for presentation and disclosure in financial statements by way of accounting standards? Why?

   B. What component/part of the Conceptual Framework should the standard setters use to decide whether an accounting standard should be issued for mandating or not mandat- ing the disclosure of accounting information?

   C. Describe how the decision process is made under this component of the Conceptual Framework!

Answer 1

A)
Financial Statement is contain not only Statement of Profit & Loss, Change in Equity, Statement of
Financial Position and Cashflow Statement but also include notes to accounts, disclosure of
accounting policies, explanatory part, etc. These information is very useful for the user of financial
statement.
If we see all the information as provided in financial statement is based on Accounting Statndard of
that country where company is registered. For example below are the part of Financial Statement
as presented in accordance with relevant International Financial Reporting Standard (IFRS).
Part of Financial Statement	IFRS/IAS
a) Statement of Financial Position	IAS 1
b) Statement of Income	IAS 1
c) Cash Flow Statement	IAS 1, IAS 2
d) Notes to Account	IAS 1
e) Accounting policies	IAS 8
Even all IFRS/IAS applies to the above mentioned Financial Statement after satisfying certain condition.
As globally accpted IFRS having uniformity so whatevery accounting rules be apply to be mandatory to
all companies to maintain the things uniform, provide comparable financial information,
control over frauds, etc.
B)
Conceptualy what is reporting requirement of Financial Statement is to be mandatory but some of the accounting policy
can be optional if financial result or financial position will not provide non true picture of financial if they disclosued
what accounting policy properly. For example fair value concept of IFRS for the Property, Plant and Equipment adoped
by many country have given flexibility to a company to choose Cost Model or Fair Value model for accounting.
C)
Concentual framework is set based on accounting concept like Going concern, Prudential, Materiality etc. So An organisation
make decision to prepare their financial statement to complying financial framework and use accounting policy with follow
the framework concept. As well as organisation need to make their accounting policy and disclore to make financial statement
understandable, comparable, freedom from error and ommission, verifiable.