AASB Conceptual Framework

Table of Content

A coverage entity is a organic structure or administration from which fiscal information is required for the users to do important determinations. As indicated in SAC 1 all coverage entities should fix general purpose fiscal studies for the society.

Administrations are in bid of a broad scope of resources that are paramount to the Australian economic system ‘s public presentation. As a consequence of the big graduated table operations conducted by concerns affecting important sums of capital, assets and resources a conceptual model has been developed to guarantee the public assistance of the community at big. It is this model requires concern entities to bring forth general purpose fiscal studies ‘which purpose to supply information utile to people doing economic determinations ‘ ( Hoggett, J, Edwards, L, Medlin, J, Tilling, M 2009, p.730 ) .

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As outlined in SAC 2, one of the purposes of general intent coverage is to run into the information demands of users who are non equipped with the cognition of the specific fiscal studies, which caters more to the demands for internal users, such as directors and investors. General purpose fiscal studies ever entail the statements of: fiscal place, income, hard currency flows, in add-on, if required by the AASB a amalgamate statement of: fiscal place, income and hard currency flows. Users require information sing the fiscal place of an entity to measure the concerns ability to bring forth financess and its ability to pay its short tern debts ( Leo, K, Hoggett, J, Sweeting J, Radford, J 2005 ) . Stakeholders and stockholders, likewise are interested in the public presentation of administrations, more significantly a company ‘s ability to utilize its capital and resources efficaciously, and expeditiously. The readying and distribution of fiscal studies provides users of the fiscal information, such as stockholders, to do the determination of go oning its investment in company or taking to put its resources elsewhere.

Harmonizing to Accounting and Finance 3B ( n.d. ) website the 2nd of import mark of general intent coverage is ‘to guarantee that studies can be used to keep companies accountable for the resources they control. ‘ Administrations are accountable to those that have a direct fiscal interest in the company. For illustration, an administration that relies on external financess to run on a day-to-day footing would necessitate Bankss as resource suppliers and providers to supply merchandises on recognition. As an entity, it is hence the administration ‘s occupation to do clear its fiscal place and its allotment and usage of resources provided by loaners through the general intent studies.

Once the general purpose fiscal studies are prepared the following issue to turn to would be the quality and the dependability of the study itself. For the studies to be of any aid to the users, the information provided in the papers must be relevant, dependable, comparable and apprehensible. These qualities are besides known as the four primary qualitative features.

Information is regarded as apprehensible if it is expected that users with some cognition of accounting and concern are able to grok the information. This qualitative feature does non propose, nevertheless, that complicated events or minutess be pulled out of the studies. It simply implies that information be recorded in a mode that can easy be understood, although the undertaking of simplifying complex minutess can be a challenge itself for the preparers ‘ of the study. However, it is an of import measure and constituent of general intent coverage.

Relevance is another factor of fiscal coverage. Information is considered to be relevant if it is free from prejudice and if it assists users of the information to do informed determinations for the hereafter. To hold relevant information in the general purpose fiscal studies, accounting information must be seasonably. For case, statement of fiscal place released a few hebdomads after the terminal of the accounting period will well be more relevant than a fiscal statement that is released months subsequently. It must besides be noted, that holding information that is relevant decreases the studies dependability, as less clip is spent on preciseness.

As outlined in paragraph 31 in the AASB model another of import qualitative features is dependability. Harmonizing to the Framework for the Preparation and Presentation of Financial Statements for information to be dependable it must be free from deceit of information and can be relied upon by users to stand for faithful and indifferent information ( 2009 ) . In contrast, with relevancy, dependability requires clip and preciseness in the readying of studies, this can besides take to the study going outdated. Therefore, comptrollers must guarantee to fix studies that are dependable, yet at the same clip relevant.

Finally the qualitative characteristic comparison requires the preparers of general purpose fiscal studies to utilize consistent methods of coverage and measuring, on the other manus methods of coverage and measuring may be changed if non relevant ( Deegan, C 2006 ) . Consistent methods of measurement and coverage enable fiscal studies to be compared over clip by users of the fiscal information.

In decision, general purpose fiscal studies effort to supply investors and possible investors with information that aid in the determination devising procedure, likewise companies display their allotment and utilizations of scarce resources to its investors and stakeholders. It is besides of import that information presented in the studies incorporate the four key qualitative features. Harmonizing to the AASB relevancy, dependability, comparison and comprehensibility are important in the readying of studies, as without the features studies are non considered to be utile for users. Therefore, it is important for preparers to pay particular attending and turn to the four qualitative features whilst fixing the general purpose fiscal studies.

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AASB Conceptual Framework. (2016, Nov 28). Retrieved from


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