The the effects of past, present and future

The Conceptual framework aims toproduce useful information such that it sets out the concepts that underlie thepreparation and presentation of financial statements. The Framework is afoundation on which accounting standards are based that will provide a generalpurpose to financial reporting. The ISAB underpins the production of financial accountsand harmonises regulations and accounting standards in order to provideinformation that is useful in making economic decisions.

Financial reporting is focused onproviding financial information that is useful to present to investors andcreditors in making decisions. The attributes that will make the informationuseful to the above future investor in a listed company will rely on twoqualitative characteristics where usefulness is set at two levels: fundamentaland enhancing qualitative characteristics. Fundamental characteristics supportuseful information in such that they are relevant and faithfully represented.Having relevance in making positive difference to decisions has predictive andconfirmatory value in such that it will help the investor to evaluate theeffects of past, present and future transactions as well as confirming previousevaluations. This has a real connection to the faithful representation of theeconomic phenomena it represents where the information is complete, neutral andfree from error. This will allow the user to gain a reasonable understandingwhere the numbers, words and explanations are unbiased but capable of making adifference without distortion and being free from material error.

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The enhancingqualitative characteristics (defined in the first phase of the joint conceptualframework) are comparability, verifiability, timeliness and understandability. Comparabilityis about identifying similarities and differences between two sets of entitieswhere relationships can be established so that for example investors are ableto decide if they are able to provide resources to a company. Verifiability assuresthat the information represents the economic phenomena where an appropriatemeasurement method is applied without being bias.

The information should beavailable to decision-makers where it will augment the capacity by evaluatingtrends in making investment or credit decisions. Understandability is enhancedwhen the information is presented clearly, concisely, classified andcharacterised. However the actual comprehension of the financial informationwill largely depend on whether the investor has reasonable knowledge ofeconomic and business activities and is able to analyse the information withdiligence. Accrual accounting and the going concern convention are the twoassumptions underlying financial statements. Under the accrual basis, thestatements provide information about past transactions making it useful to makeeconomic decisions.

The fundamental going concern assumption takes note thatthe entity continues business in the foreseeable future without the need toliquidate. It is therefore important to note that on this basis, the entitywill be able to realise its assets and discharge its liabilities.