Summary IFRS chapter 1
Chapter 1 – Reporting framework and ethics
1 Financial statements
Def.: Financial reporting: is the process of identifying, measuring and communicating economic information to others so that they may make decisions on the basis of that information and assess the stewardship of the entity´s management
- provide a summary of the performance of an entity over a particular period and of its position at the end of that period
- Limited liability companies are required by law to prepare and publish them
- IFRS are issued by International Accounting Standards Board (IASB)
- IAS 1 Presentation of Financial Statements: requires them to present fairly (representing faithfully the effects of transactions) the financial position and performance of an entity.
- departures from IFRS only allowed: extremely rare cases where compliance misleading
2 Purpose and use of financial statements
Used to make economic decisions such as:
Decide when to Buy, hold or sell and equity
Assess stewardship (management is accountable for safe-keeping of the entity´s resources and for their proper, efficient and profitable use) or accountability of management; ability to provide other benefits to employees; security for amounts lent to entity
Determine taxation policies; distributable profits and dividends
Prepare and use national income statistics
Regulate activities of entities
General purpose
Users: present and potential investors, employees, lenders, suppliers and other trade payables, customers, governments and their agencies, the public
Objective: provide information about the reporting entity´s financial position and financial performance that is useful to a wide range of users in making economic decisions.
Financial position covers:
Economic resources it controls; its financial structure; its liquidity and solvency; its capacity to adapt to changes
It helps Help assessing:
Ability to generate cash in future how future cash flows will be distributed among
1 Financial statements
Def.: Financial reporting: is the process of identifying, measuring and communicating economic information to others so that they may make decisions on the basis of that information and assess the stewardship of the entity´s management
- provide a summary of the performance of an entity over a particular period and of its position at the end of that period
- Limited liability companies are required by law to prepare and publish them
- IFRS are issued by International Accounting Standards Board (IASB)
- IAS 1 Presentation of Financial Statements: requires them to present fairly (representing faithfully the effects of transactions) the financial position and performance of an entity.
- departures from IFRS only allowed: extremely rare cases where compliance misleading
2 Purpose and use of financial statements
Used to make economic decisions such as:
Decide when to Buy, hold or sell and equity
Assess stewardship (management is accountable for safe-keeping of the entity´s resources and for their proper, efficient and profitable use) or accountability of management; ability to provide other benefits to employees; security for amounts lent to entity
Determine taxation policies; distributable profits and dividends
Prepare and use national income statistics
Regulate activities of entities
General purpose
Users: present and potential investors, employees, lenders, suppliers and other trade payables, customers, governments and their agencies, the public
Objective: provide information about the reporting entity´s financial position and financial performance that is useful to a wide range of users in making economic decisions.
Financial position covers:
Economic resources it controls; its financial structure; its liquidity and solvency; its capacity to adapt to changes
It helps Help assessing:
Ability to generate cash in future how future cash flows will be distributed among