Archive for July, 2009

IASB Framework - Financial Statements

Friday, July 24th, 2009

This is a guest post by CMA Devarajan Swaminathan. He has over 10 years post qualification experience in Accounting, Auditing, Finance as well as Management Accounting. He is the proprietor of Devarajan Swaminathan & Co - Cost Accountants.

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 The International Accounting Standards Committee Foundation (IASC Foundation) Constitution mentions about the IASB Framework twice, once in paragraph 29 and another in paragraph 43.

Paragraph 29 of the IASC Foundation Constitution reads like this:

Each full time and part time member of the IASB shall agree contractually to act in public interest and to have regard to the IASB Framework (as amended from time to time) in deciding on and revising standards.

Paragraph 43(a) of the IASC Foundation Constitution reads like this:The International Financial Reporting Interpretation Committee (IFRIC) shall interpret the application of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and provide timely guidance on financial reporting issues not specifically addressed in the IAS’s and the IFRS’s with the context of the IASB Framework and undertake other tasks at the request of the IASB.The International Accounting Standards Board Framework or the IASB Framework or the Conceptual Framework is the framework for the preparation and presentation of Financial Statements.

The IASB Framework was approved by the IASC Board in April 1989 and adopted by the IASB in April 2001.

The purpose of the IASB Framework is to assist and guide the IASB to develop new or revised standards and to assist the preparers of financial statements in applying the standards and dealing with issues that are not specifically addressed by the Standards.The Framework does not have the force of a Standard. Therefore, in case of a conflict between the Standard and the Framework, the Standard will prevail over the Framework.

The Framework deals with:

  1. The objective of financial statements
  2. The assumptions on the basis of which the financial statements are prepared.
  3.  The qualitative characteristics that determine the usefulness of information in financial statements.
  4.  The definition, recognition and measurement of the elements from which the financial statements are constructed and
  5.  Concepts of capital and capital maintenance.

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