As an Accountancy student it necessary for me to understand and gain
knowledge about the conceptual framework and Accounting standards. Knowing
that gaining knowledge about accounting standards can already be considered a
practice of the future profession. It is a big help and an opportunity for me that
our teacher has been able to give and discuss to us the history of the accounting
standards. It is very important for an individual to know the history of the thing
they've interest with.
Based on my understanding about the formation of IASB and IASB structure
that was designed to support those attributes considered desirable to establish
the legitimacy of a standard setting organization. I have also learned that the
2018-2010 constitution review was split into two parts. The first part focused on
the governance and public accountability of the International financial reporting
standard foundation, and was being effective on February 1, 2009. While the
second part of the review focused on enhancing public accountability,
stakeholder engagement and operational effectiveness. I have learned that there
is such a board that serve as a mechanism for formal interaction between capital
market authorities and IFRS Foundation and it was called as the Monitoring
board, they are the one participating in the process for appointing trustees, and
the one who review and provide advice to the trustees on the fulfillment of their
set of responsibilities.
We also have the IFRS Foundation, an independent not-for-profit private sector
organization working in the public interest. This standard is composes of 22
trustees, one chairman, and two Vice chairs, they are responsible in developing a
high quality, understandable, realistic and globally accepted IFRS information
through standard setting body. We also have the International Accounting
Standard Board, where its members are responsible for the development and
publication of IFRS, such as discussion papers and exposure drafts for public
comments. This standard board composes 15 board members, of whom 1 is the
chair and two as the Vice chair.
Conceptual framework for financial reporting describes the concept, and
general purpose of a financial reporting or the financial information. It assist the
IFRSB Board to develop standards. Its purpose is to assist preparers to develop
consistent Accounting policies, and assist all parties to understand and interpret
the standards. So it means that even if the Conceptual framework is not a
standard, it still has the essence of its existence because it helps me as a student
to understand its purpose. I have learned that conceptual framework is not fixed
and it may be change from time to time but its revision won't lead to changes to
standards.
In The objective of financial reporting or also called as a general financial
reporting, I have learned that its purpose is to provide financial information of a
reporting entity that is useful to the users of information in making decisions. To
be able for the users of information to make the assessment, they need necessary
information about the economic resources, claims against the entity which can
help users to identify the entity's financial strengths and weaknesses, and the
changes afterwards that result from the entity's financial performance that is
useful in accessing the entity's past and future ability to generate net cash flows
and from other events. It is also important to know how efficient and effective
those entity's Management in their responsibilities to use entity's economic
resources, because the general purpose financial reports are not designed to
show the value of a reporting entity, but they provide information to help this
existing, potential investors and other users of information to estimate the value
of the reporting entity.
In the chapter 2 The Qualitative characteristics of useful financial
information, based on my understanding a financial information is useful when it
is relevant which means information is capable of making difference in the
decisions made by users, and to be able for a financial information capable in
making difference in decisions it should have a predictive value where
information can be used as an input to predict future outcomes and confirmatory
value in which information provides feedback about previous evaluation. Actually
predictive value and confirmatory value are interrelated information because an
information that has a predictive value often has a confirmatory value.
Represents faithfully what it purports to represent means that every relevant
financial information of an entity should be presented and can answer the how's
and why's of the users of information. An information should have its
completeness, which means a complete depiction includes all information
necessary for a user to understand, including all necessary description and
explanation it means the everything that a users need to understand must be
presented and; Neutrality which means free from bias, it doesn't mean
information with no purpose or no influence of behavior but it means that
information is capable of making a difference in users decisions, neutrality is
supported by the prudence which means in making decisions we have to observe
caution and be conservative. Last characteristic, freedom from error, it doesn't
mean that the financial information should perfectly accurate because we are
humans, we commit mistakes in our judgments.
In chapter 3 financial statements and the reporting entity, I have learned
that a reporting entity should provide financial statements to produce financial
information that is useful to users to estimate for the future net cash inflows to
the reporting entity. I have a little knowledge about this chapter during my senior
days, because the topic of this chapter is part of Basic accounting during senior
years. I have learned that statement of financial position by recognizing assets,
liabilities, and equity. Statement of financial performance by recognizing income
and expenses. And other statements and notes.
I also learned that the going concern assumption means that an entity has neither
intention nor need to enter liquidation or to cease trading. It means that a
business can continue its operation life infinitely. Reporting entity as an entity
that is required or chooses to prepare financial statements. Last is the Accounting
Entity Assumption means that any personal property should not be merged by the
business property and vice versa.
In chapter 4, the elements of financial statements, we have asset, liabilities
and equity or the reporting entity's financial position. Income and expenses or the
reporting entity's financial performance. Based on my understanding Asset is a
present economic resource controlled by an entity as a result of past events. An
economic resource that has the potential to produce economic benefits. Liability
means a present obligation of the entity to transfer an economic resource as a
result of past events which means it is an obligation or responsibility that an
entity cannot avoid. Equity is the residual interest in the asset of the enterprise
after deducting all its liabilities. In the statement of financial performance we
have income which means an increase in asset, or decrease in liabilities, that
result in increase in equity and; Expenses which means a decrease in asset or
increases in liabilities that result in decrease equity. I also encounter for the first
time the term unit of account and executory contract. Unit of account which
means a right or a group of rights or a group of rights and obligations to which
recognition criteria and measurement concepts are applied. Executory contract is
a contract that is equally unperformed neither party has fulfilled any of its
obligation or both parties have partially fulfilled their obligations to an equal
extent.
In chapter 5, Recognition and Derecognition, I have learned that recognition
can be simply defines as an item that meets the definition of an asset, liability,
equity, income or expenses. Derecognition can be defined as item that no longer
meets the definition of an asset or of a liability. Derecognition occurs when an
entity loses control of recognize asset and when the entity no longer has a
present obligation for recognized liability.
In chapter 6, Measurement; I have learned that there are two categories of
measurement basis, the historical cost measurement basis and the current value
measurement basis. When we say Historical cost it is the price or the cost we take
to acquire a specific product. While current value measurement basis tells us the
present value of a thing.
Therefore I can say that the Conceptual framework and Accounting
standards was really a big help for us, the accountancy students because it makes
us imagine the field of our future profession our future duty and responsibilities.
Now I understand why Accountancy has the hardest licensure examination to be
passed. Conceptual framework gives us additional learning and idea for us in the
preparation of our future field. I have imagine how exciting it is to study more
accounting standards not because it is easy but because it is really hard to
understand those standards and it was true that reading 2 times, 3 times, or 4
times is not enough. It requires a lot of times to understand a single standard and
I take that as an opportunity for me as a BSA student as to practice my study habit
and at the same time gaining new knowledge.
