IFRS- Exam

The business Entity

accounting for a business must be kept separate from accounting for the owner. Separate Books.

The Time period concept

accounting must take place over a specific time period – fiscal period – these periods are of equal length

The Matching Principle

Each expense item related to revenue earned must be recorded in the same accounting period as the revenue it helped earn.

The Revenue Recognition Principle

Revenue must be recorded at the time the transaction occurs.

The Cost Principle

purchases for assets must be at the cost price to the business - the purchase price

The Expense Recognition Principle

Expenses must be recorded in the same accounting period as the revenues they helped generate

The objectivity principle

transitions are based on fact not on personal opinion. Different people should arrive at the same value.

The Continuing Concern Concept

assumption that the business will continue to operate unless it is know that it will not.

Principal of conservatism

accounting for a business should be fair and reasonable – meaning any evaluation and estimates (opinions) should neither be overstated or understated. 

The Consistency Principle

a business must use the same accounting methods and procedures from period to period. When a change is made it must be stated on the financial statements.

The Materiality Principle

all information that changes the “overview/analysis” of the financial documents must be included with the documents. If they impact the net income or financial position they must be included.

The Full Disclosure Principle

All information needed for a full understanding of a company’s financial statements must be included with the financial statements. (outstanding lawsuits, tax disputes, or company takeovers)