F1B: Financial Statements

Accrual accounting

The effects of a transaction are recognised in the period in which they occur, even if the payment occurs in a different period

Going concern

The company will continue in operation for the foreseeable future

Fundamental Accounting Equation

Assets = Equity + Liability

Asset

A present economic resource controlled by the entity as a result of past events

Economic resource

A right with the potential to produce economic benefits

Liability

A present obligation to transfer an economic resource as a result of past events

Equity

The residual interest in the assets of an entity after deducting all liabilities

Income

Increases in assets or decreases in liabilities that result in increases in equity

Recognition criteria

An item is included in the SOFP when it provides information that is relevant, a faithful representation and the cost of the info doesn’t outweigh the benefits

Derecognition

Refers to the removal of a recognised asset or liability from an entity’s SOFP. Typically this is when control of all or part of the asset is lost, or there is no longer a present obligation of a liability

Historical cost

Uses the cost of an asset or liability at the transaction date. Includes the cost of acquiring/creating an asset, plus any transactional costs

Current value

Provides information about assets, liabilities and related income and expenses

Fair value

The price received to sell an asset is paid to transfer a liability between market participants at the measurement date

Value in use

The present value of ash flows that an entity expects to derive from the use of an asset and its ultimate disposal

Fulfilment value

The present value of the cash, or other economic resource, that an entity expects to be obliged to transfer as it fulfils a liability

Current cost (asset)

The cost of an equivalent asset at the measurement date

Current cost (liability)

The current cost of a liability is the consideration that would be received for an equivalent liability at measurement date, minus transaction costs

Expenses

Decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to holders of equity claims