What is the Qualitative Characteristic? This is the attribute that makes the information providing in financial statement useful for the user. They might have two processes of fundamental qualitative characteristics. Fig. 1 Qualitative characteristics of accounting information Form the figure 1. Above has showed the processes of characteristic in fundamental qualitative that are described following by the section. - Relevance: This is the information that relating to make the financial statement of user decision differencing from the opponents. Predictive value is part of relevant information to help users evaluating the potential effect of past, present or future transaction event on the future cash flows. In addition to, the …show more content…
These are showing a six qualitative characteristic, which is influencing to the usefulness of financial information. In this situation the Felex Company could be material and their benefits of providing the information should weight their cost. Financial report information can help Felex company capital to providing their make a better decision which the result is more efficient function of their capital market and get a lower cost of capital for their whole economy between Spare Part Company. The benefit of both company may include better managing of decision because financial information using internally often also their basis is at least partly on preparing information of general purpose in financial …show more content…
Realisable (Settlement) value Assets are carrying the volume of cash that could be obtaining by selling asset in the disposal order. Liabilities are carried their settlement amount which is undiscounted a volume of cash. They are expecting to pay to satisfactory to the liabilities in their course of business. 4. Present value Assets are carry to presenting their discounted amount of the net cash flow in the future. That item is expecting to be generating in the course of business. Liabilities are carry at the present discounted value as well as they are expecting to be settling requirement in the course business. Framework compiled The concept of the capital maintenance which is concerning to the entity definition process. The framework must maintain the capital. The concept of capital and profit are providing to the reference point, which is measuring a profit as well. The entity return and the return of capital must be prerequisite for distinguishing. Not only the inflows of the asset in an excess of the value needed to maintain but also the capital might be regarded as a profit. Thus, the profit is the value of residual remaining to expense including capital maintenance. That has been taken from income. The residual volume will be loss if the income is
The collection of these three financial statements identifies the financial position of the corporation to help identify the way forward financially for the company. Once all of the data has been collected for the annual reporting the corporation can analyze the data through the different financial ratios including the liquidity ratio, the asset management ratio, and the profitability ratio.
At the end of the useful life of fixed assets the businesses will dispose, and any amount received from disposal will represent its residual value. This may be difficult to estimate in practice. How ever, an estimate has to be made. If it is unlikely to be significant amount, a residual value of zero will be assumed. The cost of fixed assets less its estimated residual value represents the total amount to be depreciated over its estimated useful life.
d. To improve the understandability and comparability of amounts reported by requiring employers with similar plans to use the same method to measure their pension and other postretirement benefit obligations and the related costs of the postretirement benefits.
Held to maturity securities are also debt securities, but a company holds onto it until it matures. These are reported and measured on the balance sheet at the amortized cost value. They are classified as noncurrent assets, unless they reach their maturity within one year after the balance sheet date.
It outlines the interconnection of a company’s financial and non-financial elements and aims to combine them and show value creation and maintenance. It identifies resources and their effective and responsible usage. It intends to create a dialogue between the shareholders and other stakeholders and provides them with detailed information.
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
Paragraph 92 stated, disclosure of some or all of the information required by paragraphs 84–89 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been
The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ Profitability - This information comes from the Profit and Loss account. Were we can compare this year's profit with the previous years.
Accounting principles are main consideration , certain standards like rules of operations are pillar characteristicis to built accounting statements. Accounting principles can be presented in many ways, sometimes its create confusion for readers mainly for beginners, but still acoounting principles are main tool to obtained financial statements. Its hold the whole acoounting process together.
(i) Judgement and materiality play a significant role in helping to ensure that the selection of accounting policies in presenting the financial statements for a true and fair picture of the company’s financials. This means that entities should provide the financial statements with comparability, consistency and clarity to users of these statements. Entities must follow accounting policies required by IFRS and AASB should be relevant to particular circumstance.
The capital maintenance concept used results in differences between the relevance and faithful representation of the data that appears in the balance sheet and income statement. The difference between financial capital maintenance and physical is the treatment of unrealized holding gains and losses. Financial capital maintenance does not allow for unrealized holding gains and losses. Only realized gains and losses are included in income because they “are considered a return on capital” (Schroeder et al., 2013). This means, “income is measured only after the investment is recovered” (Gamble, 1981). Physical capital maintenance “consider[s unrealized holding gains and losses] as returns of capital and do[es] not include them income.” (Schroeder et al., 2013). Instead, they are treated as adjustments to equity and included in other comprehensive income. Therefore, with physical capital maintenance “an increase in an entity’s wealth as...
The statement of profit or loss is also known as income statement and it’s equation is revenue minus expenses equals profit or loss. The statement of profit or loss summarize the revenues and expenses of a business and also shown the ability of a business to generated business. The total profit or loss that generated in an organization during an accounting period can be seen through the income statement. For example, if the expenses of the company are higher than revenues, the company will get a loss in the business. However, the company will generate a profit when the revenues are greater than the
For example: if bhatbhateni’s inventory cost $20000 but in current scenario the cost has dropped to $16000, than the company records $16000 in its balance sheet and records $4000 difference amount as a loss in income statement. (accounting coach, 2016)
Another characteristic of qualitative research is that it is personal and contains very little scientific terminology. For example, the researchers seek to understand human issues and problems or why humans behave in a certain manner. This type of empathetic approach in a quantitative research is a very unique in characteristic. Also, in a qualitative research, researches interact with the participants or sample, this is very important because they need to observe their behavior. As a result, it causes the research to be more up close and personal. This type of approach is what makes a qualitative research unique or different from quantitative research. (Smith &...
"The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions."[Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance.