ch02 cost accounting

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ILLUSTRATION 2-1A CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

ASSUMPTIONS PRINCIPLES CONSTRAINTS

QUALITATIVE

CHARACTERISTICSof

accounting

information

ELEMENTSoffinancial

statements

OBJECTIVEof

financialreporting First Level: The why goalsand purposes of accounting

Second Level: Bridgebetween levels 1

and 3

Third Level:The how

implementation

Recognition, Measurement, and Disclosure Concepts

Copyright 2011 John Wiley & Sons, Inc. KiesoIntermediate: IFRS Edition Teaching Transparencies 15


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ILLUSTRATION 2-2A CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

(with details)


First level: The "why"purpose of accounting

Second level: Bridge

between levels 1 and 3

Third level:

The "how"

implementation

ELEMENTSQUALITATIVE

CHARACTERISTICS1. Fundamental qualities

A. Relevance(1) Predictive value(2) Confirmatory value

B. Faithful representation(1) Completeness(2) Neutrality(3) Free from error

2. Enhancing qualities(1) Comparability(2) Verifiability(3) Timeliness(4) Understandability

1. Assets

2. Liabilities

3. Equity

4. Income

5. Expenses

1. Economic entity

2. Going concern

3. Monetary unit

4. Periodicity

ASSUMPTIONS1. Measurement

2. Revenue recognition

3. Expense recognition

4. Full disclosure

PRINCIPLES1. Cost

2. Materiality

CONSTRAINTS

Recognition, Measurement, and Disclosure Concepts

Provide informationabout the reportingentity that is useful

to present and potentialequity investors,

lenders, and othercreditors in their

capacity as capitalproviders.

OBJECTIVE


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ILLUSTRATION 2-3A HIERARCHY OF ACCOUNTING QUALITIES

YTILIBAILERECNAVELER

DECISION MAKERS

AND THEIR CHARACTERISTICS

VerifiabilityTimelinessPredictive

value

DECISION USEFULNESS

Feedback

value

ycnetsisnoCytilibarapmoC

UNDERSTANDABILITY

MATERIALITY

(Threshold for recognition)

COST < BENEFITS

(Pervasive constraint)

Users of

accounting information

Constraints

User-specific qualities

Pervasive criterion

Primary qualities

Ingredients

of primaryqualities

Secondaryqualities

NeutralityRepresentational

faithfulness


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Resources and claims toresources at a moment in time

(Financial Position)

Transactions and events thatchange resources and claims toresources over a period of time

(Changes in Financial Position)

1. ASSETS

2. LIABILITIES

3. EQUITY

4. INCOME

5. EXPENSES

ARTICULATION

ILLUSTRATION 2-4ELEMENTS OF FINANCIAL STATEMENTS

ch02 cost accounting

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