The Framework deals with:

 

(a)       Objective of financial statements;

(b)       Qualitative characteristics that determine the usefulness of information in financial statements;

(c)        Definition, recognition and measurement of the elements from which financial statements are constructed; and

(d)       Concepts of capital and capital maintenance.

 

 

Objective of financial statements

 

The objective of financial statements is to provide information about the

financial position, performance and changes in financial position of an entity

that is useful to a wide range of users in making economic decisions.

 

Underlying assumptions

Accrual basis

Going concern

 

Qualitative characteristics of financial statements

 

Understandability

Financial statements are readily understandable by users. For this purpose, users are assumed to have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence.

 

Relevance

Information has the quality of relevance when it influences the economic decisions of users by helping them evaluate past, present or future events or confirming, or correcting, their past evaluations.

 

Materiality

Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

 

Reliability

Information has the quality of reliability when it is free from material error and bias and can be depended upon by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent.

 

Faithful representation

Information must represent faithfully the transactions and other events it either purports to represent or could reasonably be expected to represent.

 

Substance over form

Transactions and other events represented are to be accounted for and presented in accordance with their substance and economic reality and not merely their legal form.