Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Preface
Financial statements are prepared and presented for external users by many enterprises
around the world. Although such financial statements may appear similar from country to
country, there are differences which have probably been caused by a variety of social,
economic and legal circumstances and by different countries having in mind the needs of
different users of financial statements when setting national requirements.
These different circumstances have led to the use of a variety of definitions of the elements
of financial statements; that is, for example, assets, liabilities, equity, income and
expenses. They have also resulted in the use of different criteria for the recognition of
items in the financial statements and in a preference for different bases of measurement.
The scope of the financial statements and the disclosures made in them have also been
affected.
The International Accounting Standards Committee (IASC) is committed to narrowing
these differences by seeking to harmonise regulations, accounting standards and
procedures relating to the preparation and presentation of financial statements. It believes
that further harmonisation can best be pursued by focusing on financial statements that are
prepared for the purpose of providing information that is useful in making economic
decisions.
The Board of IASC believes that financial statements prepared for this purpose meet the
common needs of most users. This is because nearly all users are making economic
decisions, for example, to:
(a) decide when to buy, hold or sell an equity investment;
(b) assess the stewardship or accountability of management;
(c) assess the ability of the enterprise to pay and provide other benefits to its employees;
(d) assess the security for amounts lent to the enterprise;
(e) determine taxation policies;
(f) determine distributable profits and dividends;
(g) prepare and use national income statistics; or
(h) regulate the activities of enterprises.
The Board recognises, however, that governments, in particular, may specify different or
additional requirements for their own purposes. These requirements should not, however,
affect financial statements published for the benefit of other users unless they also meet the
needs of those other users.
Financial statements are most commonly prepared in accordance with an accounting model
based on recoverable historical cost and the nominal financial capital maintenance
concept. Other models and concepts may be more appropriate in order to meet the
objective of providing information that is useful for making economic decisions although
there is presently no consensus for change. This Framework has been developed so that it
is applicable to a range of accounting models and concepts of capital and capital
