Conceptual Framework for Accounting

This set of vocabulary flashcards covers the organizational structure, standards, and concepts within the Conceptual Framework for Accounting in both the Philippine and International contexts.

International Accounting Standard Committee (IASC)

An international organization founded in $1973$ that issued International Accounting Standards ($IAS$) numbered $1-41$.

International Accounting Standards Board (IASB)

The successor to the IASC that issues International Financial Reporting Standards ($IFRS$), which state how transactions and events should be reported and presented in financial statements.

SIC Interpretations and IFRIC Interpretations

Guidance on financial reporting issues that are not specifically addressed in existing standards, issued by the Standard Interpretation Committee and the International Financial Reporting Interpretations Committee respectively.

Accounting Standards Council (ASC)

The Philippine standard-setting body established in $1981$ to develop local accounting principles influenced by US GAAP, issuing Philippine Accounting Standards ($PAS$) $1-41$.

Financial Reporting Standard Council (FRSC)

A body established in $2006$ to replace the ASC with the purpose of adopting and aligning with International Financial Reporting Standards ($IFRS$), issuing Philippine Financial Reporting Standards ($PFRS$).

Financial and Sustainability Reporting Standards Council (FSRSC)

The current Philippine standard-setting body established in $2022$ that expanded its purpose to include sustainability reporting and align with the International Sustainability Standards Board ($ISSB$).

FINEX

The Financial Executives Institute of the Philippines, which provides one representative to the composition of the FSRSC.

Conceptual Framework for Financial Reporting

A complete, comprehensive, and single document promulgated by the IASB providing concepts, terms, and assumptions that underlie the preparation and presentation of financial statements for external users.

Reporting Entities

Entities with users who rely on the financial statements as their source of financial information about the entity.

General-Purpose Financial Statements (GPFS)

Reports intended for general users for decision-making purposes, governed by standards like $PFRS$ and $IFRS$, such as the Balance Sheet and Income Statement.

Special-Purpose Financial Reports (SPFS)

Reports designed for specific users or particular needs, such as tax reports, loan applications, and management reports, which may not always follow accounting standards.

Qualitative Characteristics

The attributes that make the information provided in the financial statements useful to users in making economic decisions, classified into fundamental and enhancing characteristics.

Relevance

A fundamental qualitative characteristic where financial information is capable of making a difference in decisions if it has predictive value, confirmatory value, or both.

Predictive Value

The quality of information that helps users predict or forecast future outcomes.

Confirmatory Value

The quality of information that provides feedback about previous evaluations.

Materiality

An entity-specific aspect of relevance acting as a quantitative threshold where information is significant if omitting or misstating it could influence user decisions.

Faithful Representation

A fundamental qualitative characteristic where financial reports represent economic phenomena in words and numbers that match what really existed, emphasizing substance over form.

Completeness

A characteristic of faithful representation involving adequate or full disclosure of information.

Neutrality

A characteristic of faithful representation meaning information is provided without bias.

Prudence/Conservatism

The exercise of care and caution in measuring assets, liabilities, income, or expenses.

Free From Error

A characteristic of faithful representation where there are no omissions or errors in the description and process of a transaction.

Comparability

An enhancing qualitative characteristic that enables users to identify and understand similarities and differences among items within an entity (horizontal/intra-comparability) or across entities (dimensional/inter-comparability).

Consistency

The use of the same method for the same item for each period.

Verifiability

An enhancing qualitative characteristic synonymous with objectivity, where direct or indirect consensus can be arrived at by different observers.

Timeliness

An enhancing qualitative characteristic where financial information is made available to decision-makers in time to be capable of influencing their decisions.

Understandability

The result of classifying, characterizing, and presenting information clearly and concisely for users with reasonable business knowledge and diligence.

Accrual Accounting

An accounting method that depicts the effects of transactions and other events on an entity's economic resources and claims in the periods in which those effects occur.

Cost-Benefit Principle

The constraint that the benefits derived from financial information must exceed the costs incurred in obtaining and reporting that information.