1. 4
Conceptual Framework of Financial Statements

2. CHAPTER OBJECTIVES

3. Purpose of the Framework Assistance to: Preparers Auditors
Introduction
Purpose of the Framework
Assistance to:
Preparers
Auditors
Users of Financial Statements
Accounting Standards Board (ASB)
Scope and Coverage
Components of Financial Statements
Balance Sheet
Statement of Profit and Loss
Cash Flow Statement
Notes to Account and Accounting Policies

4. Researsh in Financial Reporting
Case 1: Research in financial reporting Tata Motors Ltd.

6. Objective of Financial Statements Financial position
Economic resources
Financial structure
Liquidity and solvency
Performance
Cash flows
Users and Their Information Needs
Present and Potential Investors
Employees and their Representative Groups
Lenders
Suppliers and other Trade Creditors
Customers
Governments and their Agencies
Public
Management
Others

7. Case 2 Reliance Industries Ltd. Annual Report 2005–06

9. Assumptions Underlying Preparation of Financial Statements
Accrual basis
Going concern
Consistency
Qualitative Characteristics of Financial Statements
Understandability
Relevance
Materiality

10. Illustration 1

11. Constraints on qualitative characteristics
Reliability
Faithful representation
Substance over form
Neutrality
Prudence
Completeness
Comparability
Constraints on qualitative characteristics
Balance between Timeliness and Reliability
Balance between Benefit and Cost
Balance between Qualitative Characteristics
True and fair view

12. Definitions and Characteristics
Definitions, Characteristics Recognition and Measurement of the Elements of Financial Statements
Definitions and Characteristics
Financial position
Assets
Liabilities
Equity
Performance
Income
Expenses
Cash flows
Recognition
Process of recognition
Specific Issues

13. Concepts of Capital and Capital Maintenance Capital
Measurement
Measurement bases
Historical cost
Current cost
Realisable value
Present value
Concepts of Capital and Capital Maintenance
Capital
Financial concept
Physical concept
Capital maintenance and determination of profit
Financial capital maintenance
Illustration 2
Physical capital maintenance

14. Case 3 Infosys Technologies Ltd. (Annual Report 2005–06)
Concluding Remarks