1. Introduction to Accounting Preparing for a User’s Perspective
What is the Conceptual Framework and how does it provide guidance and structure to financial reporting?
Debits and Credits Trainer
By Kevin C. Kimball, CPA
with support from
Free Jan. 2014
Available on the Google Play Store

2. 2004 FASB IASB New Accounting Standards Framework
Conceptual Framework- Joint Project

3. Phases of the Conceptual Framework-Joint Project
We’re out of here.
We’re still in this.
FASB
IASB
Phases of the Conceptual Framework-Joint Project

4. FASB FASB Conceptual Framework
Phase A: Objectives and Qualitative Characteristics (completed Sept 28, 2010)
FASB Conceptual Framework
Statement of Financial Accounting Concepts No. 8 September 2010
Conceptual Framework for Financial Reporting
Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative characteristics of Useful Financial Information
Framework should benefit:
FASB
Standard setters
World economies
Users

5. Benefits to standard setters
Consistent guidance
Common foundation & basic reasoning
FASB
IASB
Noncontradictory

6. Benefits to world economies and markets

7. Statement of Cash Flows
Benefits to users’ of financial statements
Purpose
Intent
Income Statement
Statement of Equity
Balance Sheet
Statement of Cash Flows
Framework
Footnote disclosures
Users

8. FASB Conceptual Framework
Statement of Financial Accounting Concepts No. 8 September 2010
Conceptual Framework for Financial Reporting
Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative characteristics of Useful Financial Information
FASB – Accounting Standards Codification 100 General Principles 200 Presentation of Financial Statements 300 Assets
400 Liabilities 500 Equity 600 Revenue 700 Expenses 800 Broad Transactions 900 Industry
x x x x x x x x x x x x x x x x x x x x x
US GAAP
is enforceable
Conceptual Framework
is not enforceable

9. Phases of the Conceptual Framework-Joint Project
We’re out of here.
We’re still in this.
FASB
IASB
Phases of the Conceptual Framework-Joint Project

10. Phase A FASB Conceptual Framework Who is it for? What are its goals?
Statement of Financial Accounting Concepts No. 8 September 2010
Conceptual Framework for Financial Reporting
Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative characteristics of Useful Financial Information
Who is it for?
What are its goals?
What makes it helpful?

11. Chapter 1, The Objective of General Purpose Financial Reporting
Investors
Creditors
Fair market value

12. Chapter 1, The Objective of General Purpose Financial Reporting
Resources
Claims
Assets
Liabilities & Equity

13. Faithfully Represented
Chapter 3, The Qualitative Characteristics of Useful Information
Relevant
Faithfully Represented
Predict Future
Confirm Past
It is what it says it is

14. Relevance Your reports show you will soon be out of cash
You were right about the costs.
Cash
Predictive Value
Confirmatory Value

15. Faithful Representation
Free from Error
Neutral
Does not mean perfectly accurate
Complete

16. $1 B Materiality A B $100 M error in
Did you know A’s CEO fraudulently included $5 M?
$100 M
Net Income
I didn’t know that. I think I’ll lend to B now.
Probably Is Quantitatively
Material
I’ll lend to A.
$5 M
$1 B
error in A B
Net Income
Probably is Not
Quantitatively
Material
Qualitatively
Material

17. A Year 1 B Year 1 A Year 1 A Year 2
We have a consensus.
A Year 1
B Year 1
clear
Comparability
Verifiability
Timeliness
Understandable
concise
A Year 1
A Year 2
Enhancing Qualitative Characteristics of Useful Financial Information
(Comparability, Verifiability, Timeliness, Understandability)
Fundamental Qualitative Characteristics of Useful Financial Information (Relevant & Faithful Representation)
Material
Objective of General Purpose Financial Reporting

18. Introduction to Accounting Preparing for a User’s Perspective
What is the Conceptual Framework and how does it provide guidance and structure to financial reporting?
Debits and Credits Trainer
By Kevin C. Kimball, CPA
with support from
Free Jan. 2014
Available on the Google Play Store