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CFAS 04 Conceptual Framework - Underlying Assumptions

This document provides an overview of key concepts in financial reporting, including the objectives of financial statements, types of statements, the reporting entity, reporting period, and underlying assumptions. The general objectives of financial statements are to assess future cash flows and management stewardship. Financial information includes statements of financial position, performance, and cash flows. The reporting entity can be an individual company or group of entities. Annual financial reports are required, while interim reports are optional. The main underlying assumption is that the entity is a going concern that will continue operating indefinitely.

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Adriana Del rosario
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94 views

CFAS 04 Conceptual Framework - Underlying Assumptions

This document provides an overview of key concepts in financial reporting, including the objectives of financial statements, types of statements, the reporting entity, reporting period, and underlying assumptions. The general objectives of financial statements are to assess future cash flows and management stewardship. Financial information includes statements of financial position, performance, and cash flows. The reporting entity can be an individual company or group of entities. Annual financial reports are required, while interim reports are optional. The main underlying assumption is that the entity is a going concern that will continue operating indefinitely.

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Adriana Del rosario
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Conceptual Framework:

Underlying Assumptions
CFAS Course Module 04
General Objective of Financial Statements
● Financial statements provide information on:
○ Assessing future cash flows to the reporting entity
○ Assessing management stewardship of the entity’s economic resources
● Financial Information is provided on the following:
○ Statement of financial position (Assets, Liabilities, Equity)
○ Statement of financial performance (Income and Expenses)
○ Other statements and disclosures on:
■ Recognized assets,liabilities, equity, income,and expenses
■ Unrecognized assets and liabilities
■ Cash flows
■ Contributions from equity holders and distributions to equity holders
■ Method, assumption, and judgement in estimating amount presented
Types of Financial Statements
● Consolidated Financial Statements (parent and subsidiary)
● Unconsolidated Financial Statements (parent only)
● Combined Financial Statements (two or more entities not linked by a parent
and subsidiary relationship)
Reporting Entity
● A reporting entity is an entity that is required or chooses to prepare financial
statements.
● The following are considered as reporting entity:
○ Individual corporation, partnership, or proprietorship
○ The parent alone
○ The parent and its subsidiaries as single reporting entity
○ Two or more entities without parent and subsidiary relationship as a single entity
○ A reportable business segment of an entity
Reporting Period
● The reporting period is the period when financial statements are prepared for
general purpose financial reporting.
● Interim financial reports are those prepared for periods less than one year,
and is optional; however, annual financial reports are required.
Underlying Assumptions
● Accounting assumptions are the basic notions or fundamental premises on
which accounting is based.
● There is only one assumption in the conceptual framework which is the going
concern
● Going concern is the assumption that the entity will continue its operations
indefinitely.

Note: Sa accounting lang pwede mag assume. Sa love life bawal.


Other Assumptions (not stated in Conceptual
Framework)
● Accounting Entity. The entity is separate and distinct from its owners
● Time Period. This assumptions states that the indefinite life of an entity is
divided into equal lengths for the purpose of financial reporting, and thus
reports are made annually - either calendar or fiscal year)
● Monetary Unit
○ Quantifiability - this states that element of the financial statement should be stated in a unit of
measure
○ Stability - this states that the purchasing power of peso is constant.

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