In: Accounting
Your assistant has been reading the IASB’s Frame work for the Preparation and Presentation of Financial Statements (the Framework) and, as part of the qualitative characteristics of financial statements under the heading of ‘relevance’, he notes that the predictive value of information is considered important. He is aware that financial statements are prepared historically (ie after transactions have occurred) and offers the view that the predictive value of financial statements would been hance difforward- looking information (forexample, forecasts) were published rather than backward-looking historical statements.
Required
By the use of specific examples, provide an explanation to your
assistant of how IFRS presentation and disclosure requirement s can
assist the predictive role of historically prepared financial
statements
The Framework is also of value to auditors, and the users of financial statements, and more generally help interested parties to understand the IASB’s approach to the formulation of an accounting standard. | ||||||||||||||||
The content of the Framework can be summarised as follows: | ||||||||||||||||
Identifying the objective of financial statements | ||||||||||||||||
The reporting entity (to be issued) | ||||||||||||||||
Identifying the parties that use financial statements | ||||||||||||||||
The qualitative characteristics that make financial statements useful | ||||||||||||||||
The remaining text of the old Framework dealing with elements of financial statements: assets, liabilities equity income | ||||||||||||||||
and expenses and when they should be recognised and a discussion of measurement issues (for example, historic cost, current cost) and the related concept of capital maintenance. | ||||||||||||||||
The development of t he Framework over the years has led to the IASB producing a body of world-class standards that have the following advantages for those companies that adopt them: |