The Conceptual Framework:
• is considered a normative theory
• seeks to identify the objective of general purpose financial reporting
• seeks to provide accounting guidance within a ‘coherent’ and ‘consistent’ framework
• identifies the qualitative characteristics financial information should possess 7 | P a g e H I 6 0 2 5 G r o u p A s s i g n m e n t T 2 2 0 1 7
• makes recommendations that sometimes depart from current practice Other normative theories Three main classifications
• Current-cost accounting
• Exit-price accounting
• Deprival-value accounting Financial statement preparation process (from Business Activities to Financial Statements) and influencing factors: Financial statements are an important source of information to the capital markets. Quality financial reporting provides much-needed relevant and reliable information to capital market participants.
The Following features of accounting systems facilitate quality information:
a) The role of accrual accounting
b) Accounting standards or generally accepted accounting principles (GAAP)
c) Auditing of financial information
d) Delegation of reporting to management
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