Conceptual Framework

2106 Words9 Pages
FRAMEWORK FOR THE PREPARATION
AND
PRESENTATION OF FINANCIAL STATEMENTS

PURPOSE AND STATUS OF THE FRAMEWORK

The FRSC Framework for the Preparation and Presentation of Financial Statements describes the basic concepts by which financial statements are prepared. The Framework serves as a guide to the Board in developing accounting standards and as a guide to resolving accounting issues that are not addressed directly in Philippine Accounting Standards or Philippine Financial Reporting Standards or Interpretations. The purpose of the framework as outlined is to:

a. Assist the Financial Reporting Standards Council (FRSC) in developing accounting standards that represent generally accepted accounting principle;

b. Assist the
…show more content…
The Framework states that information about performance is primarily provided in an income statement.

Changes in Financial Position or Cash Flows

Users of financial statements seek information about the investing, financing and operating activities that an enterprise has undertaken during the reporting period. This information helps in assessing how well the enterprise is able to generate cash and cash equivalents and how it uses those cash flows. The cash flow statement provides this kind of information.

Underlying Assumptions (Postulates)

The Framework sets out the underlying assumptions of financial statements: • Accrual Basis. The effects of transactions and other events are recognized when they occur, rather than when cash or its equivalent is received or paid, and they are reported in the financial statements of the periods to which they relate.

• Going Concern. The financial statements presume that an enterprise will continue in operation indefinitely or, if that presumption is not valid, disclosure and a different basis of reporting are required.

The FRSC conceptual framework mentions two assumptions only. However, it is widely believed that an inherent trait of the financial statements are the basic assumptions of: • Accounting Entity. The business is separate from the owners, managers, and employees who constitute the business. Therefore transactions of the said individuals

More about Conceptual Framework

Open Document