Financial Reporting Framework and Standard Setting

These flashcards cover key concepts in financial reporting and the development of accounting standards, focusing on definitions and objectives central to understanding financial statements and their standards.

Financial Accounting

The process that culminates in the preparation of financial reports for use by both internal and external parties.

Financial Statements

Principal means through which a company communicates its financial information to outside parties.

Objective of Financial Reporting

To provide financial information to potential investors, lenders, and other creditors useful in decision making.

General-purpose financial statements

Financial statements that provide the most useful information to a wide variety of users.

Equity investors and creditors

Primary user groups of financial statements with immediate information needs.

Entity perspective

View of a company as separate from its investors, where assets belong to the company.

Proprietary perspective

Focuses on owners' interests, viewing accounting as determining net worth.

Decision-usefulness

Information in financial statements must help investors assess cash inflow prospects.

Accounting Standards

Network of guidelines and rules representing generally accepted accounting principles (GAAP).

International Accounting Standards Board (IASB)

Organization that develops a single set of global accounting standards to help economic decision-making.

IASC Foundation

Independent organization consisting of Trustees and the IASB, overseeing accounting standards.

Financial Reporting Standards Council (FRSC)

New accounting standard-setting body created in the Philippines to develop accounting standards.

Qualitative Characteristics of Useful Financial Information

Includes relevance, faithful representation, verifiability, comparability, understandability, and timeliness.

Going Concern Assumption

Financial statements assume that the reporting entity will continue its operations in the foreseeable future.

Recognization

The inclusion of an item in financial statements if it meets the definition of an asset, liability, equity, income, or expense.

Derecognition

The removal of a recognized asset or liability from an entity's statement of financial position.

Control

An entity controls an economic resource if it can direct its use and obtain its economic benefits.

Current Cost

The cost of an equivalent asset on the measurement date, including the price paid and transaction costs.

Measurement Bases

Identifies the main features (e.g., historical cost, fair value) used in quantifying financial statement elements.

Expeditious Drafting

The process of preparing and publishing financial standards and exposure drafts for public comment.

IFRIC Interpretations Committee

Body that issues implementation guidance on Philippine Accounting Standards and related interpretations.

Financial Capital Maintenance

Profit is earned if the net assets at the end of the period exceed those at the beginning, excluding owner contributions.

Physical Capital Maintenance

Profit is earned only if the entity's physical productive capacity at the end of the period exceeds that at the beginning.