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Conceptual Framework
AAT Financial Statements Conceptual Framework definitions
Term | Definition |
---|---|
Going concern | assumption that business will continue in operation for the foreseeable further and has no intention to change scale of operations |
Relevance | it is capable of influencing the decisions of users eg by something being in the accounts it makes a prospective customer not buy from them, or a prospective investor not to invest. |
Faithful representations | complete, neutral and free from error |
Comparability | over time and with similar info about other entities |
Verifiability | eg through audit assurance, both credible and reliable |
Timeliness | within a timescale suitable for their decision making purposes |
Understandibility | to those that want to review and use it. Facilitated through appropriate classification, characterisation and presentation of information |
Materiality | if its omission or misstatement, either individually or in aggregate with other omissions or misstatements, could influence the economic decisions of the users of the financial statements. |
Assets | A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. |
Liability | A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. |
Equity interest | The residual interest in the assets of the entity after deducting all its liabilities |
Income | Both revenue and gains |
Expenses | Both losses and expenses that arise in the normal course of business. Distributions to shareholders (dividends) are not expenses. |
Historical cost | amount of cash paid to acquire them. Liabilities are recorded at the processed received in exchange for the obligation |
Current cost | Assets are carried at current purchase price. Liabilities are carried at the undiscounted amount currently required to settle them |
Realisable value | assets are carried at the amount which could currently be obtained by an orderly disposal. Liabilities are carried at their settlements values. |
Present value | assets are at present discounted value of future net cash inflows. Liabilities are carried at present discounted value of the expected cash outflows necessary to settle them. |