aconceptualframeworkforfinancialreporting-wenkub
2022-08-31 14:28:18 本頁面
【正文】 mic decisions of users. ? Faithful representation – represent faithfully the transactions and events that it purports to represent – Economic substance over legal form – This kind of information can be depended on by users if it possesses the following merits. ? Completeness (free from material omission) ? Neutrality (free from deliberate or systematic bias) ? free from material error ( but allow estimation) 13 – Prudence ? Exercising a degree of caution in making judgment about estimates required under conditions of uncertainty, such that assets and gains are not overstated and liabilities and losses are not overstated. Enhancing ? Comparability – Information about a reporting entity is more useful if it can be pared with a similar information about other entities and with similar information about the same entity for another period or another date. – Comparability enables users to identify and understand similarities in, and differences among, items. – Disclose the accounting polices and the change in them (Application of IAS 8)。s capital has been maintained at a predetermined level. ? Financial capital maintenance (FCM) – Set aside profits in order to preserve the value of shareholders’ funds in ‘real terms’. – Money FCM /CPP FCM ? Physical /Operating capital maintenance (PCM, OCM) – Set aside profits in order to allow the business to continue to operate at current levels of activity. 29 Example ? Beginning – $100 / 1 unit inventory = $100/ capital ? Inventory was sold for $160. ? Inflation rate is 20%. ? Ending – Current cost of 1 unit inventory was $150. ? Profit under FCM and PCM? 31 Measurement base Accounting model FCM Historical Cost HCA Constant Purchasing Power CPPA PCM Current Cost CCA Historical cost accounting ? Advantage – recording assets at their original historical costs reduces subjectivity to a minimum – record gains until they are realised. 32 ? Disadvantage – asset values are outdated, particularly understated (inflation) – Ignore the effect of rising prices on moary items – profits are overstated (match historical cost with current revenue, inflation). If profits were distributed in full, the level of operations would have to be curtailed. – ROCE is overstated – Less parability Example 5, p184 Constant purchasing power accounting ? Moary items – already stated at current purchasing power, and no adjustment is required. – Gain or loss on purchasing power ? Nonmoary items – uplift to reflect price
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