The qualitative features of relevance, comparability and reliability identified in IASB’s Framework for the preparation and presentation of financial statements (Framework) are some of attributes that make financial information useful to various users of financial statements.
Elucidate what is meant by relevance, comparability and reliability and how they make financial information useful.
Throughout the year ended 31 March 2007, Rico experienced the following transactions or events:-
(a) Entered in the finance lease to rent an asset for substantially the entire of its useful economic life;
(b) A decision was made by Board to change the company’s accounting policy from one of expensing the finance costs on building latest retail outlets to one of capitalizing such costs;
(c) The company’s income statement prepared using chronological costs showed a loss from operating its hotels, but company is aware which the raise in the value of its properties throughout the period far outweighed the operating loss.
Elucidate how you would treat the items in (a) to (c) above in Rico’s financial statements and indicate on which of Framework’s qualitative characteristics your treatment is based.
The transaction-based historical cost concept was uncontested for many years till price levels started to move upwards at an ever-increasing pace. As such, the chronological cost base for financial reporting witnessed growing criticism. In order to combat the serious defects of chronological Cost Accounting, current value accounting became the subject of research and controversy as to most proper technique to use for financial reporting. Several current income and value models have been proposed to replace or operate in tandem with historical cost convention. But, they might be diminished to (3) three main models.
In brief discuss each of the (3) three models.
In July 2000, IASC members voted to abandon the organisation’s former structure, which was based on professional bodies, and adopt the new structure. As from the end of 2000, standards were set by the professional board, financed by voluntary contributors increased by a new oversight body.
a. In brief discuss the setting up of new structure.
b. Highlight and discuss in brief the formal procedure of IFRS standard setting.