Conceptual framework for financial reporting

Conceptual
Framework
For Financial Reporting

Learning objectives

Explain the roles and structures of key regulatory bodies.

Learning objectives Describe efforts to construct a conceptual framework.

Understand the objective of financial reporting.

Identify the qualitative characteristics of accounting information.

Define the basic elements of financial statements.

Describe the basic assumptions of accounting.

Explain the application of the basic principles of accounting.

Understand the concepts of capital maintenance.

1
Conceptual framework for financial reporting

Organizational
structure of
IASB
International Accounting
Standard Board (Hội đồng
chuẩn mực KTQTE)

 The IASC Foundation is an independent

foundation based in the US.

 Its activities are directed by the Trustees who

appoint the members to the IASB, SAC and
IFRIC.

 The trustees are individuals of diverse

geographical and functional backgrounds and
comprise of 6 members from North America, 6
from Europe, 4 from Asia Pacific and 3 from
other parts of the world.

 Of the 19 members, 5 represent the

accounting profession and others represent
the international organisation of preparers,
users and academics.
4

2
Conceptual framework for financial reporting

International Accounting
Standards Board
IASB is responsible for
• developing and issuing new international standards;
• which are known as International Financial Reporting
Standards (IFRS).
hàng đầu
IASB consists of 15 members and their foremost
qualification is technical expertise. All members are
appointed for a terms of 5 years, renewable once.
Before a standard, exposure draft or a final IFRIC cơ quan
interpretation can be published, at least 8 out of the 15
diễn giải
members must approve it.
hướng dẫn của IASB
All existing IASs and SICs remain in force until
amended or withdrawn in the future.
Therefore, IFRS includes IFRSs, IFRIC, IASs and SIC
Interpretation. 5

The objectives of the IFRS

Advisory Council are:
• To give advice to the IASB on
agenda decisions and priorities in
its work;
• To inform the IASB of the views of
organizations and individuals on
the Council on major standards
setting projects;
• To give other advice to the Board
or to the Trustees

3
Conceptual framework for financial reporting

IFRS Interpretation Committee

This International Financial Reporting

Interpretation Committee (IFRIC)

 is a committee of the IASB;

 review, on a timely basis, new financial

reporting issues not specifically
addressed in IFRS;

 clarify issues where unsatisfactory or

conflicting interpretations have
developed, with a view to reaching a
consensus on the most appropriate
treatment.

Apr 1989
Framework for the Preparation and Presentation of
Financial Statements was approved by the IASC Board.

Jul 1989
The Framework was published.

Apr 2001
The Framework was adopted by the IASB.

Sep 2010
The Conceptual Framework for Financial
Reporting 2010 was approved by the IASB.

Mar 2018
WWW.IFRS.ORG

Conceptual Framework for Financial Reporting 2018

(the Conceptual Framework) was published.

4
Conceptual framework for financial reporting

The Conceptual Framework

It is not an accounting standard

Conceptual
Framework
establishes the
It is a guidance to the concepts that underlie
preparation and presentation of financial reporting.
financial statements

It does not override any accounting

standards

The purposes of the conceptual framework

Aim 01 Aim 02 Aim 03

assist the International assist preparers to develop assist all parties to

Accounting Standards consistent accounting policies understand and interpret
Board (Board) to develop when no Standard applies to a the Standards.
IFRS Standards particular transaction or other
(Standards) that are based event, or when a Standard allows
on consistent concepts a choice of accounting policy.

10

5
 1.Thực thể kinh tế
2. Hoạt động liên tục 1. Đo lường
Conceptual framework for financial
3. Thước đo tiền tệ
reporting 2. Nhận diện & Đánh
4. Kỳ kế toán giá
5. Dồn tích 3. Trình bày & Công
bố
4. Bảo toàn vốn

ASSUMPTIONS PRINCIPLES CONSTRAINTS

1. Economic entity 1. Measurement 1. Cost
2. Going concern 2. Recognition and
Derecognition Third level
3. Monetary unit The "how"—
3. Presentation and
4. Periodicity implementation
Disclosure
5. Accrual
4. Capital maintenance

QUALITATIVE
CHARACTERISTICS ELEMENTS
1. Fundamental 1. Assets
qualities 2. Liabilities
Đặc điểm chất lg 3. Equity
Second level
2. Enhancing Bridge between
gồm: Cơ bản & qualities 4. Income
levels 1 and 3
5. Expenses
Nâng cao
OBJECTIVE
Provide information
about the reporting
Conceptual Framework entity that is useful
for Financial Reporting to present and potential First level
equity investors, The "why"—purpose
lenders, and other of accounting
creditors in their
capacity as capital
providers.

Contents of the conceptual framework

Chapter 1: The objective of general purpose financial reporting

Chapter 2: The reporting entity
Chapter 3: Qualitative characteristics of useful financial information
CF 2010

Chapter 4: The Framework (1989): The remaining text

Underlying assumption Gỉa định cơ bản
The elements of financial statements Các nhân tố BCTC
Recognition of the elements of financial statements
Nhận biết các nhân tố BCTC
Measurement of elements of financial statements Đo lường nhân tố trên BCTC
Concepts of capital and capital maintenance Khái niệm vốn & bảo toàn vốn

12

6
Conceptual framework for financial reporting

Contents of the conceptual framework

Chapter 1: The objectives of general purpose financial reporting

Chapter 2: Qualitative characteristics of useful financial information
Chapter 3: Financial statements and the reporting entity
CF 2018

Chapter 4: The elements of financial statements

Chapter 5: Recognition and derecognition
Chapter 6: Measurement
Chapter 7: Presentation and disclosure
Chapter 8: Concepts of capital and capital maintenance

13

Conceptual framework 2018

7
Conceptual framework for financial reporting

The objective of general

purpose financial reporting

to provide financial information about the reporting entity that is useful to

existing and potential investors, lenders and other creditors in making
decisions relating to providing resources to the entity

Users’ decisions involve decisions about:

buying, selling or providing or settling voting, or otherwise

holding equity and loans and other influence
debt instruments forms of credit management’s actions
1
5

The objective of general purpose financial reporting

To make decisions users must:

assess of the
amount, timing and
uncertainty of (the
prospects for) future
net cash inflows to
the entity

assess of
management’s
stewardship of the
entity’s economic
resources
16

8
Conceptual framework for financial reporting

Information to make decisions

Nợ
nguồn lực kinh tế Claims
Economic resources

Changes in economic
Changes in economic resources and claims not
resources and claims by resulting from financial
financial performance performance
Thay đổi nguồn lực Thay đổi nguồn lực ngoài 17

từ HĐKD HĐKD

18

9
Conceptual framework for financial reporting

Qualitative
characteristics of
useful financial
information

Phù hợp Trình bày

trung thực

19

Relevance

Conceptual Framework
for Financial Reporting
20

10
Conceptual framework for financial reporting

Fundamental qualitative characteristics

Fundamental Quality—Relevance

To be relevant, accounting information must be capable of making

a difference in a decision.
Để phù hợp, thông tin kế toán phải có khả năng tạo ra sự
khác biệt trong một quyết định.
LO 4

Fundamental qualitative characteristics

Fundamental Quality—Relevance

Financial information has predictive value if it has value as an input to

predictive processes used by investors to form their own expectations
about the future.
Thông tin tài chính có giá trị dự đoán nếu nó có giá trị như một đầu vào
LO 4
cho các quá trình dự đoán được các nhà đầu tư sử dụng để hình thành kỳ
vọng của họ về tương lai.

11
Conceptual framework for financial reporting

Fundamental qualitative characteristics

Fundamental Quality—Relevance

Relevant information also helps users confirm or correct prior

expectations.
Thông tin liên quan cũng giúp người dùng xác nhận hoặc
sửa chữa các kỳ vọng trước đó.
LO 4

Fundamental qualitative characteristics

Fundamental Quality—Relevance

Information is material if omitting it or misstating it could influence

decisions that users make on the basis of the reported financial
information.
Thông tin là trọng yếu nếu bỏ sót hoặc trình bày sai thông tin
có thể ảnh hưởng đến các quyết định mà người sử dụng đưa ra LO 4
trên cơ sở thông tin tài chính được báo cáo.

12
Conceptual framework for financial reporting

Faithful Representation

Conceptual Framework
for Financial Reporting
25

Fundamental qualitative characteristics

Fundamental Quality—Faithful Representation

Faithful representation means that the numbers and descriptions

match what really existed or happened.
Trình bày trung thực có nghĩa là các con số và mô tả đúng với
những gì thực sự tồn tại hoặc đã xảy ra.
LO 4

13
Conceptual framework for financial reporting

Fundamental qualitative characteristics

Fundamental Quality—Faithful Representation

Completeness means that all the information that is necessary for

faithful representation is provided.
Sự đầy đủ có nghĩa là tất cả các thông tin cần thiết cho sự trình
bày trung thực đều được cung cấp.
LO 4

Fundamental qualitative characteristics

Fundamental Quality—Faithful Representation

Neutrality means that a company cannot select information to favor

one set of interested parties over another.
Tính trung lập có nghĩa là một công ty không thể chọn thông tin
để có lợi cho một nhóm các bên quan tâm hơn một nhóm khác.
LO 4

14
Conceptual framework for financial reporting

Fundamental qualitative characteristics

Fundamental Quality—Faithful Representation

An information item that is free from error will be a more accurate

(faithful) representation of a financial item.
Một mục thông tin không có sai sót sẽ là một sự trình bày chính xác hơn
(trung thực) cho một khoản mục tài chính.
LO 4

Enhancing qualitative characteristics

Enhancing Qualities

Information that is measured and reported in a similar manner for

different companies is considered comparable.
Thông tin được đo lường và báo cáo theo cách tương tự cho
các công ty khác nhau được coi là có thể so sánh được. LO 4

15
Conceptual framework for financial reporting

Enhancing qualitative characteristics

Enhancing Qualities

Verifiability occurs when independent measurers, using the same

methods, obtain similar results.
Khả năng xác minh xảy ra khi những người đo độc lập, sử dụng
các phương pháp giống nhau, thu được các kết quả tương tự. LO 4

Enhancing qualitative characteristics

Enhancing Qualities

Timeliness means having information available to decision-makers

before it loses its capacity to influence decisions.
Kịp thời có nghĩa là cung cấp thông tin cho những người ra quyết
định trước khi họ mất khả năng tác động đến các quyết định. LO 4

16
Conceptual framework for financial reporting

Enhancing qualitative characteristics

Enhancing Qualities

Understandability is the quality of information that lets reasonably

informed users see its significance.
Tính dễ hiểu là chất lượng của thông tin cho phép những người
dùng được thông tin hợp lý thấy được tầm quan trọng của nó. LO 4

Qualitative characteristics - Exercises

Exercise: Identify the qualitative characteristic(s) to be used given
the information provided. Characteristics
(a) Qualitative characteristic being Relevance
displayed when companies in the Faithful representation
same industry are using the same Predictive value
accounting principles.
Confirmatory value
(b) Quality of information that confirms Neutrality
users’ earlier expectations.
Materiality
(c) Imperative for providing comparisons Timeliness
of a company from period to period.
Verifiability
(d) Ignores the economic consequences Understandability
of a standard or rule. Comparability
LO 5

17
Conceptual framework for financial reporting

Qualitative characteristics - Exercises

Exercise: Identify the qualitative characteristic(s) to be used given
the information provided. Characteristics
(e) Requires a high degree of consensus Relevance
among individuals on a given Faithful representation
measurement. Predictive value
(f) Predictive value is an ingredient of this Confirmatory value
fundamental quality of information. Neutrality
(g) Four qualitative characteristics that Materiality
enhance both relevance and faithful Timeliness
representation.
Verifiability
(h) An item is not reported because its Understandability
effect on income would not change a Comparability
decision.
LO 5

Qualitative characteristics - Exercises

Exercise: Identify the qualitative characteristic(s) to be used given
the information provided. Characteristics
(i) Neutrality is a key ingredient of this Relevance
fundamental quality of accounting Faithful representation
information. Predictive value
(j) Two fundamental qualities that make Confirmatory value
accounting information useful for Neutrality
decision-making purposes.
Materiality
(k) Issuance of interim reports is an Timeliness
example of what enhancing
Verifiability
ingredient?
Understandability
Comparability
LO 5

18
Conceptual framework for financial reporting

37

Financial statements and reporting entity

Statement of financial position

Liquidity

Current liability
Current
asset Non current liability

Equity Economic resources & claims

Non current asset Strengths & weaknesses
Liquidity & solvency

38

19
Conceptual framework for financial reporting

Financial statements and reporting entity

Statement of comprehensive income
Revenue
Profit or loss from
Expenses operating activity
Financial income Profit or loss from financial
Financial expenses activity

Other income Profit or loss from other

activity
Other expenses
Profit or loss before tax Changes in resources & claims
Income tax from financial performance
Profit or loss after tax
- Components of that return
 Efficiently effective use of the
Other comprehensive income reporting entity’s resources

39

Financial statements and reporting entity

Statement of changes in equity
Share Retain Revaluation
Total
capital earnings surplus

Balance as at 1/1/X6
Retrospective application
Issuance of new share
Dividend
Transfers between equity components
Balance as at 31/12/X6 Changes in Resources & claims
NOT from financial performance
debt or equity instruments

40

20
Conceptual framework for financial reporting

Financial statements and reporting entity

Statement of cash flows

Net cash from operating activities

Net cash from investing activities
Net cash from financing activities

Changes in cash flows

Cash generating ability
Cash usage

41

42

21
Conceptual framework for financial reporting

Basic elements

Conceptual Framework
for Financial Reporting
43

The elements of financial statements

Asset Income
Liability

Equity
Expenses

44

22
Conceptual framework for financial reporting

Basic elements
Elements of Financial Statements

Asset A present economic resource controlled

by the entity as a result of past events.

Liability An economic resource is a right that has

the potential to produce economic
benefits.
Equity

Income

Expenses

LO 5

Basic elements
Elements of Financial Statements

Asset
A present obligation of the entity to
transfer an economic resource as a result
Liability
of past events.

Equity

Income

Expenses

LO 5

23
Conceptual framework for financial reporting

Basic elements
Elements of Financial Statements

Asset

Liability

The residual interest in the assets of the

Equity
entity after deducting all its liabilities.

Income

Expenses

LO 5

Basic elements
Elements of Financial Statements

Asset
Lợi ích kinh tế tăng lên trong kỳ kế toán dưới hình
thức dòng vốn vào hoặc tăng cường tài sản hoặc giảm
Liability các khoản nợ phải trả làm tăng vốn chủ sở hữu, trừ các
khoản liên quan đến đóng góp của các bên tham gia góp vốn.

Equity Increases in economic benefits during the

accounting period in the form of inflows or
enhancements of assets or decreases of
Income
liabilities that result in increases in equity,
other than those relating to contributions
Expenses from equity participants.

LO 5

24
Conceptual framework for financial reporting

Basic elements
Elements of Financial Statements

Asset Lợi ích kinh tế giảm trong kỳ kế toán dưới dạng dòng chảy
ra ngoài hoặc cạn kiệt tài sản hoặc phát sinh nợ phải trả dẫn
đến giảm vốn chủ sở hữu, trừ những lợi ích liên quan đến việc
Liability phân phối cho các bên tham gia cổ phần.

Equity Decreases in economic benefits during the

accounting period in the form of outflows
Income or depletions of assets or incurrences of
liabilities that result in decreases in equity,
other than those relating to distributions to
Expenses
equity participants.
LO 5

50

25
Conceptual framework for financial reporting

51

Recognition, measurement, disclosure concepts

These concepts explain how companies should recognize,

measure, and report financial elements and events.

Recognition, Measurement, and Disclosure Concepts

ASSUMPTIONS PRINCIPLES CONSTRAINTS
1. Economic entity 1. Measurement 1. Cost
2. Going concern 2. Recognition
3. Monetary unit 3. Derecognition
4. Periodicity 4. Presentation and
disclosure
5. Accrual

LO 6

26
Conceptual framework for financial reporting

Basic assumptions
Economic entity
Company keeps its activity separate from its
owners and other business unit.

Accrual
Going concern
Transactions are recorded in the periods in which
the events occur. Company to last long enough to fulfill objectives
and commitments.

Periodicity Monetary unit

Company can divide its economic activities into Money is the common denominator.
time periods.

53

How recognition links the elements of financial statement

Principles

Recognition
is the process of capturing
for inclusion in the
statement of financial
position or the statement(s)
of financial performance an
item that meets the
definition of one of the
elements of financial
statements—an asset, a
liability, equity, income or
expenses.

54

là quá trình nắm bắt để đưa vào báo cáo tình hình tài chính hoặc (các)
báo cáo kết quả hoạt động tài chính một khoản mục đáp ứng định nghĩa
của một trong các yếu tố của báo cáo tài chính — tài sản, nợ phải trả, vốn
chủ sở hữu, thu nhập hoặc chi phí. 27
Conceptual framework for financial reporting

Recognition criteria
When?

 Meets the definition of an element

 Provides users of financial statements with relevant information and faithful
representation
 And information which results in benefits which exceed the cost of providing that
information.

55

Recognition criteria
whether recognition of an item results in relevant
information may be affected
v by, for example:

Existence uncertainty Low probability of an inflow or

outflow of economic benefits

› it is uncertain whether an asset › An asset or liability can exist even if

exists or is separable from goodwill, the probability of an inflow or outflow
or whether a liability exists. of economic benefits is low.

56

28
Conceptual framework for financial reporting

Recognition criteria
a faithful representation may be affected by the level of
measurement uncertainty or by other factors.
v

Measurement uncertainty Other factors

› the depiction of resulting income,

expenses and changes in equity.
› a measurement of an asset or › whether related assets and liabilities
liability is available but the level of are recognized.
measurement uncertainty is so high. › presentation and disclosure of
related information can enable a
recognized amount to form part of a
faithful representation.

57

Derecognition

Derecognition is the
removal of all or part of a
recognised asset or
liability from an entity’s
statement of financial › derecognition
› derecognition
Liabilities

position. normally occurs

normally occurs
Assets

when the entity no

when the entity
longer has a
loses control of all
present obligation
or part of the
for all or part of the
recognised asset
recognised liability.
58

29
Conceptual framework for financial reporting

Recognition

59

Chapter 5: Recognition and

Derecognition
60

30
Conceptual framework for financial reporting

-Gía gốc -Gía hiện hành (giá trị đầu vào

-> đc mua trên thị trg vs giá bnhiu) (đối vs lạm phát cao)

Measurement
Historical cost Current cost
Assets are recorded at the amount of cash or Assets are carried at the
cash equivalent paid or the fair value of the amount of cash or cash
consideration given to acquire them. equivalent that would be
Liabilities are recorded at the amount of paid if the asset were
proceeds received in exchange for the debt. acquired currently.
Liabilities are carried at
the discounted value or
Realisable value cash equivalent that would
Assets are carried at the be required to settle the
amount of cash or cash debt currently.
equivalent that could
currently be obtained by
selling the asset in an Present value
orderly disposal. The Assets are carried at the discounted value of
liabilities are carried at the future cash inflows that the items are
their settlement values expected to generate in the normal course of
being undiscounted business. Liabilities are carried at the
amounts of cash that need discounted value of the future net cash
to be paid in the course of outflows required to settle the liabilities in the
business. normal course of business.
61

-Gía trị có thể thực hiện (giá trị đầu ra -Hiện giá (giá trị chiết khẩu dòng tiền theo thời gian)
-> đc bán trên thị trg giá bnhiu) (khi thanh lý cty)

Measurement
 Measurement bases Có 2 cơ sở đo lường:
 Factors to consider when selecting a measurement basis

 Measurement bases

Historical cost Current value

 historical cost, amortized cost, carrying amount...  fair value, value in use, fulfilment value is
 Derived from the transaction or event that updated at measurement date.
created them  capture any positive or negative changes
 Do not reflect changes in prices, do reflect
change in consumption (depreciation or
amortization), impairment, or fulfilment.
 historical cost of the asset is no longer
recoverable. 62

31
Conceptual framework for financial reporting

Measurement
 Measurement bases
 Factors to consider when selecting a measurement basis

 Factors to consider when

selecting a measurement basis
 Must be relevant and it must faithfully represent what it purports to represent
 Should, as far as possible, be comparable, verifiable, timely and understandable
 Benefits of the information must be sufficient to justify the cost of providing that
information

63

Cost constraint

Cost Constraint ràng buộc chi phí

Companies must weigh the costs of providing the information
against the benefits that can be derived from using it.

 Rule-making bodies and governmental agencies use cost-

benefit analysis before making final their informational
requirements.

 In order to justify requiring a particular measurement or

disclosure, the benefits perceived to be derived from it
must exceed the costs perceived to be associated with it.

LO 8

32
Conceptual framework for financial reporting

Measurement

Measurement

66

33
Conceptual framework for financial reporting

Presentation and disclosure

PRESENTATION AND DISCLOSURE

PRINCIPLES

CLASSIFICATION

 Classification of assets and liabilities

Offsetting

 Classification of equity

 Classification of income and expenses

67

Presentation and disclosure principles

Effective communication in
financial statements

entity-specific information No duplication Không trùng

lặp

› duplication of information in
› entity-specific information is
different parts of the financial
more useful than standardised
statements is usually
descriptions, sometimes
unnecessary and can make
referred to as ‘boilerplate’
financial statements less
understandable.

68

34
Conceptual framework for financial reporting

Classification
01 Classification is applied to the unit of account selected
for an asset or liability.

Classification
of assets and 02
Offsetting
Offsetting occurs when an entity recognises and
measures both an asset and liability as separate units

liabilities
of account, but groups them into a single net amount in
the statement of financial position.

Offsetting vs. A set

03 Offsetting assets and liabilities differs from treating a
set of rights and obligations as a single unit of account.

69

Classification of equity

Classify components of equity separately if some of

those components are subject to particular legal,
regulatory or other requirements.

70

35
Conceptual framework for financial reporting

Classification of income and expenses

Classification is applied to
(a) income and expenses resulting from the unit of account selected for an asset or liability; or

(b) components of such income and expenses if those components have different characteristics and are
identified separately. me and expenses resulting from the unit of account selected for an asset or liability;

The statement of profit or loss

• The statement of profit or loss is the primary source of information about an entity’s financial performance
for the reporting period;
• Profit or loss could be a section of a single statement of financial performance or a separate statement;
• The statement(s) of financial performance include(s) a total (subtotal) for profit or loss;
• In principle, all income and expenses are classified and included in the statement of profit or loss;
• Income and expenses that arise on a historical cost measurement basis are included in the statement of
profit or loss. That is also the case when income and expenses of that type are separately identified as a
component of a change in the current value of an asset or liability.
71

Classification of income and expenses

Other comprehensive income
• In exceptional circumstances, the Board may decide to exclude from the statement of profit or loss income
or expenses arising from a change in current value of an asset or liability and include those income and
expenses in other comprehensive income
• The Board may make such a decision when doing so would result in the statement of profit or loss providing
more relevant information or a more faithful representation

Recycling
• In principle, income and expenses included in other comprehensive income in one period are recycled to
the statement of profit or loss in a future period when doing so results in the statement of profit or loss
providing more relevant information or a more faithful representation
• When recycling does not result in the statement of profit or loss providing more relevant information or a
more faithful representation, the Board may decide income and expenses included in other comprehensive
income are not to be subsequently recycled
72

36
Conceptual framework for financial reporting

Capital concept

Capital can be
• the net assets of an entity or
• the amount of capital contributed by
the owners plus increases in the net
assets that remain in the entity.

Capital can be expressed as money

invested or purchasing power invested.

It can also be expressed in terms of

productive capacity.

73

- Vốn có thể được biểu thị bằng tiền đầu tư hoặc sức mua được đầu tư.
- Nó cũng có thể được thể hiện dưới dạng năng lực sản xuất.

Concepts of capital maintenance

Bảo toàn vốn tài chính Bảo toàn vốn vật lý

Financial capital maintenance Physical capital maintenance

Nominal monetary units or units of
constant purchasing power)

Capital = Net asset or equity of the entity. Capital = Productive capacity of the entity (measured as
units of output per day)
Used if the main concern of the user of the financial
statements is the maintenance of the nominal value Used if the main concern of the user of the financial
invested capital. statements is the operating capacity of the entity.

Profit is the difference in money terms between the Profit is earned only if the operating capacity at the end of
opening and closing capital excluding any contributions the period exceeds that of the beginning of the period.
from and distribution to owners.

74

37
Conceptual framework for financial reporting

Concepts of capital maintenance

Physical capital FCM - FCM – Constant

maintenance Monetary term purchasing power
 Profit represents the increase  Profit represents the increase › Profit represents the increase in
in that capital over the period. in nominal money capital over invested purchasing power over
the period. the period.
Profit

 All price changes of the assets  Increases in the prices of  Only that part of the increase
and liabilities are viewed as assets may not be recognized in the prices of assets that
changes in the measurement until the assets are disposed exceeds the increase in the
Increase in the of the physical productive
capacity of the entity  as
of in an exchange transaction. general level of prices is
regarded as profit. The rest of
prices capital maintenance the increase is treated as a
adjustments that are part of capital maintenance
equity and not as profit. adjustment and, hence, as part
of equity.

75

Example

On 1 Jan X0, an inventory was purchased with the

price of 100 CU. On 31 Dec X0, the purchasing
power increase by 10%. The present value of the
inventory was 130 CU. The inventory was sold on 1
Jan X0 at the price of 150 CU.
Required: Calculate the carrying amount of
inventory, P/L and OCI under different capital
maintenance views.

76

38
Conceptual framework for financial reporting

Answer

Accounting items FCM – Monetary term FCM – Constant PP term Physical CM

Inventory (1.1.x0)

Inventory (31.12.x0)

Changes in equity (31.12.x0)

Profit or Loss (31.12.x0)

77

The
End!
Address: Contact:
196 Tran Quang Khai st., School of Accounting –
District 1, HCMC, Vietnam University of Economics, HCMC

78

39