IFRSs are based on the Framework, which addresses the concepts underlying the information presented in general purpose financial statements
The objective of the Framework is to facilitate the consistent and logical formulation of IFRSs.
The Framework also provides a basis for the use of judgement in resolving accounting issues.
This Framework is not an International Accounting Standard and hence does not define standards for any particular measurement or disclosure issue.
Nothing in this Framework can override any specific IFRS
In case there is a conflict, between the Framework and the Standards, the requirements of the standards shall prevail.

Conceptual Framework sets out agreed concepts that underlie financial reporting

IASB uses Conceptual Framework to set standards

Preparers use Conceptual Framework to develop accounting policies in the absence of specific standard or interpretation - IAS 8 hierarchy

Going concern: For the foreseeable future

Note:
Previously, "accrual" was also a part of the underlying assumption however the same has been removed now as it was noted that “accrual” was more of a presumption and hence no need to list it as an assumption.

Reporting financial information imposes costs, and it is important that those costs are justified by the benefits of reporting that information.

In applying the cost constraint, the IASB assesses whether the benefits of reporting particular information are likely to justify the costs incurred to provide and use that information. Those assessments are usually based on a combination of quantitative and qualitative information.

Asset: Resource controlled as a result of past events and from which future economic benefits are expected to flow.
Note: Asset should be recognized based on “Neutrality” and not on "Conservatism/Prudence".

Liability: Present obligation arising from past events, the settlement of which is expected to result in outflow of resources embodying economic benefits

Income (expense): Increases (decreases) in economic benefits during period from inflows or enhancements (outflows or depletions) of assets (liabilities) or decreases (incurrences) of liabilities from in increases (decreases) in equity, other than contributions from (distributions to) equity.

Equity: Residual value = Assets minus liabilities

Accrual basis of accounting - recognise element (eg asset) when satisfy definition and recognition criteria

Recognise item that meets element definition when

IAS 1 sets out overall requirements for presenting financial statements, guidelines for their structure and minimum requirements for content.
- the nature and amount of economic resources (and claims) is useful because different types of resources affect a user's assessment of the entity's prospects for future cash flows differently.
- information about the variability and components of the return produced is useful in assessing the uncertainty of future cash flows.

A complete set of financial statements comprises a
- statement of financial position,
- statement of profit or loss and comprehensive income,
- statement of changes in equity,
- statement of cash flows
- notes to financial statements
- statement of financial position as at the beginning of the earliest comparative period (incase of IAS 8)
- Refer to the Implementation Guidance to IAS 1 in Part B.

Financial statements must present fairly the financial position, financial performance and cash flows of an entity (paragraph 15).
- complying with IFRSs (with additional disclosures) is presumed to result in a fair presentation.

Going concern
- financial statements may only be prepared on this basis if management assess that this is appropriate
Accrual basis of accounting
Materiality
- Each material class of similar items is presented separately
- Dissimilar items are presented separately, unless they are immaterial
- Materiality is determined by the potential of the information, or its omission, to influence economic decisions made by users of the financial statements
- Materiality is entity specific and user focused

Is the error material?
Ex 1: Before its 20X8 FS approved for issue discovered depreciation expense for 20X8 overstated by CU150. Ignored the error (reported profit for 20X8 at CU600,000, ie understated by CU150).

Ex 2: Same as Ex 1, except had the error been corrected the entity would have breached a borrowing covenant on a significant long‑term liability.
Offsetting
- not applicable unless required or permitted by IFRS
Frequency of reporting
- at least annually
Comparative information
- required unless IFRS specifies not- consider comparatives when changing the presentation or classifications of items
Consistency of presentation
- retain the presentation and classification of items unless IFRS requires a change or due to changes in an entity’s operations another alternative would be more appropriate.

Presentation of current and non current assets and liabilities as separate classifications on the Statement of Financial Position
The distinction is based on:
- timing of realisation or settlement of the asset or liability
- primary purpose for holding the asset or liability

Make current/non-current distinction unless liquidity presentation is reliable and more relevantIn liquidity presentation present assets and liabilities in order of liquidity
Current assets and current liabilities are defined
All other assets and liabilities are non-current
Deferred tax balances are non-current

Current asset if
- expect to realise, sell or consume in entity’s normal operating cycle.
- held for trading.
- expects to realise in next 12 months.
- cash or equivalent, unless restricted for at least 12 months.
- All other assets are classified as Non-current.

Entity A produces whisky from barley, water and yeast in a 24-month distillation process. Inventories include barley and yeast raw materials, partly distilled whisky and distilled whisky.

Current assets-expected to be realised (ie turned into cash) in the entity’s normal operating cycle.

On 1/1/20X7 B invested CU900,000 in corporate bonds.
Fixed interest of 5% per year is payable on 1 January each year.
Capital is repayable in 3 annual instalments of CU300,000 each starting 31/12/20X8.

At 31/12/20X7 A presents
- current assets—CU45,000 accrued interest & CU300,000 capital repayable on 31/12/20X8—expected to be realised within 12 months
- non-current asset—CU600,000 in +12 months

Current liability if
- expect to settle in entity’s normal operating cycle
- held for trading
- due to be settled in next 12 months
- entity does not have an unconditional right (debtor) to defer settlement for at least 12 months after reporting date

An obligation to suppliers for the purchase of raw materials.

Current liability—expected to settle (ie pay) the supplier in the entity’s normal operating cycle.

At 31/12/20X7 A was in breach of a covenant in a loan that is otherwise repayable 3 years later. The breach entitles (but does not oblige) the bank to require immediate repayment.

At 31/12/20X7 the loan is a current liability—at 31/12/20X7 A does not have an unconditional right to defer settlement for at least 12 months.

Same as in Ex 2 except after the end of the reporting period (31/12/20X7) and before the financial statements were approved for issue, the bank formally agreed not to demand early repayment of the loan.

At 31/12/20X7 the loan is a current liability—at 31/12/20X7 A does not have an unconditional right to defer settlement for at least 12 months.

Preparing financial statements requires judgement and the use of estimates (eg materiality judgements and going concern assessments—when it is doubtful whether the entity has no realistic alternative but to liquidate).

IAS 1 requires disclosure of:
- judgements that management has made in the process of applying the entity’s accounting policies that have the most significant effect
- Information about major sources of estimation uncertainty.
- Preparing financial statements requires judgement regarding the best way in which to present financial information
- Financial statements are, generally, prepared on the going concern basis-judgement may be required when determining whether this basis is appropriate.

This Standard requires particular disclosures in all the financial statements and requires disclosure of other line items either in those statements or in the notes.

An entity shall clearly identify the financial statements and distinguish them from other information in the same published document.

Additional information:
- The name of the reporting entity.
- Whether the FS are for an individual entity or a group.
- The period which the financial statements cover.
- The presentation currency as defined in IAS 21.
- The level of rounding used.

Complete set of financial statements comprises:
- Statement of financial position (SOFP)
- Statement of comprehensive income (SOCI)
- Statement of changes in equity (SOCIE)
- Statement of cash flow (SOCF)
- Accounting policies and explanatory notes
Statement of financial position as at the beginning of the earliest comparative period when IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors applies

Additional statements encouraged.

OCI has the following five components (all net of taxes):
- Actuarial gains and losses on defined benefit plans (IAS 19)
- Gains and losses on re-measuring available-for-sale financial assets (IAS 39)
- Translation gains and losses (IAS 21)
Note: While "transaction" difference are to be recognised in Profit or Loss, "translation" difference is to be recognized in OCI.
- Effective portion of gains and losses on hedging instruments in a Cash flow hedges.
- Changes in revaluation surplus (IAS 16 and IAS 38).
- Self risk gains and losses on financial liabilities (IFRS 9 – Not applicable as of now).
An entity shall disclose:
- the amount of income tax relating to each component of OCI.
- reclassification adjustments relating to components of OCI.

These are amounts reclassified to profit or loss in the current period that were recognised in Other Comprehensive Income in previous periods.

The following items of the OCI shall be reclassified to profit or loss:
- Foreign exchange differences.
- Effective portion of Cash flow hedges

The other items of the OCI shall not be reclassified to profit or loss but should be transferred to Retained Earnings directly.

Separate statement
- Total comprehensive income for period
- Amounts of transactions with owners in their capacity as owners
- For each component of equity effect of retrospective application or restatement (IAS 8)
- For each component of equity reconciliation between carrying amount at the beginning and the end of period
In addition either in this statement or in notes, need to present dividends recognised as distributions to owners during period and their amount per share.

Contents of Notes:
Disclosure of accounting policies
- Measurement bases
- Accounting Policies
- Judgments that management has made
- Key sources of estimation uncertainty
Other disclosures
- Details about the entity
- Dividends
- Disclosure about service concession arrangements
- Capital disclosures