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Financial Statements:

A financial statement is a formal record of the financial activities of a business, person, or other entity. A financial statement is often referred to as an account, although the term financial statement is also used particularly by accountants. For an enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand are called the financial statements. They typically there are four basic financial statements: 1. Statement of Financial Position: also referred to as a balance sheet, reports on a company's assets, liabilities, and ownership equity at a given point in time. 2. Statement of Comprehensive Income: also referred to as Profit and Loss statement, reports on a company's income, expenses, and profits over a period of time. A Profit & Loss statement provides information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. 3. Statement of Changes in Equity: explains the changes of the company's equity throughout the reporting period. 4. Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities.

1.1)

International Accounting Standard No 1 (IAS 1):

1.1.1) Presentation of Financial Statements:

This revised Standard replaces IAS 1 (revised 1997) Presentation of Financial Statements will apply for annual periods beginning on or after January 1, 2005.

1.1.2) Objectives of Financial Statements:

The objective of this Standard is to lay the groundwork for the submission of financial statements for purposes of general information to ensure that they are comparable, both with the financial statements of the same entity in prior years, as with those of various other entities.

1.1.3) Perspectives of the Financial Statements:

There are two perspectives of the financial Statements: 1) Decision Making Perspective. 2) Stewardship Perspective. Stewardship Perspective: Stewardship is an ethic that embodies responsible planning and management of resources, including with respect to environment, economics, health, property, information, religion and is linked to the concept of sustainability.

1.1.4) Scope:
This rule applies to all types of financial statements for purposes of general information, which are drafted and presented in accordance with the International Financial Reporting Standards (IFRS). The financial statements for purposes of general information are those which seek to meet the needs of users who are not in a position to demand reports to their specific needs for information. The

financial statements for purposes of general information include those which presented separately, or in another document of a public nature as the annual report.

1.1.5) Purpose of Financial Statements

The financial statements are a representation of structured financial position of the entity. The objective of financial statements for purposes of general information is to provide information about the financial position, financial performance and cash flows of the entity. It is useful to users to take their economic decisions. The financial statements also show the results of management by managers with the resources entrusted to them. To meet this objective, the financial statements provide information about the following elements of the entity: (a) Assets. (b) Liabilities. (c) Net worth. (a) Expenditures and revenues, which include gains and losses. (b) Changes in equity. (c) Cash flows. This information, along with that contained in the notes, will help users to predict future cash flows and in particular the timing and degree of certainty for them. Figure below shows that, according to the IASB Framework the users of financial statements include present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the public. (PECLISC)

1.1.6) Components of financial statements:

A complete set of financial statements include the following components: (a) Stock. (b) Income statement. (c) A statement of changes in equity showing: (i) All changes in equity, or (ii) Changes in equity other than those from transactions with owners. (d) Cash flow statement. (e) Notes, which will include a summary of significant accounting policies and other explanatory notes.

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Notes

1.2.1) the notes:

Notes Present information about the basis for the preparation of financial statements. Disclose information that is required by IFRS, was not present in the balance sheet, in the income statement, statement of changes in equity or the cash flow statement. Notes provide additional information that had not included in the balance sheet, in the income statement, statement of changes in equity or the cash flow statement is relevant for understanding some of them.

1.2.2) Presentation of Notes:

The notes will be presented, as is practicable and in a systematic way. Each Item of balance sheet, the income statement, statement of changes in equity and cash flow statement will contain a cross reference to the relevant information in the notes. Normally, the notes will be presented in the sequence order, in order to help users understand the financial statements and compare them with those submitted by other entities.

QUESTION No 2 2.0) Conceptual Framework:

A conceptual framework is a formal set of interrelated concepts specifying the function, scope and purpose of financial accounting and reporting. A conceptual framework is a constitution for the accounting standard setting process.

Types of Conceptual Framework:

A conceptual framework can be descriptive, prescriptive or a mixture of both: A descriptive framework attempts to develop a set of interrelated concepts, which serves to explain existing financial reporting practices. (What are the accounting Practices). A prescriptive framework attempts to develop a conceptual basis for what financial accounting practices should be. (What should be the accounting Practices).

2.1)

Why Conceptual Frame Work:

The conceptual framework is a recent concept. In fact, many accounting standard setters have historically operated without having a conceptual framework in place. Functions of financial statements involved in a framework ensures, consistency and assists in the development of future standards. The framework can assist users in interpreting information contained within financial statements as it provides an understanding of the principles on which they are prepared. In practice social, economic and political factors often play a role and influence the guidance provided by standards.

2.1.1) IASB-FASB joint project:

At their joint meeting in October 2004, the IASB and the FASB decided to add to their respective agendas a joint project to develop a common conceptual framework that both Boards would use as a basis for their accounting standards. The two boards reached the following decisions about the project: The project should initially focus on concepts applicable to business entities in the private sector beginning with nonprofit organizations in the private sector. The project should be divided into phases: Phase A: Objectives and qualitative characteristics. Phase B: Elements and recognition.

Phase C: Measurement. Phase D: Reporting entity. Phase E: Presentation and disclosure. Phase F: Purpose and status. Phase G: Application to not-for-profit entities. Phase H: Remaining issues. (OM RAPPER)

The converged framework should be in the form of a single document. It should include a summary and a basis for conclusions.

2.2)

Project milestones: (46881010)

Date Development Comprehensive project added to the active agenda Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information published (Phase A) Exposure Draft An improved Conceptual Framework for Financial Reporting: Chapters 1 and 2 published (Phase A) Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Reporting Entity (Phase D) Exposure Draft ED/2010/2 Conceptual Framework for Financial Reporting: The Reporting Entity published (Phase D) Conceptual Framework for Financial Reporting 2010published Comment deadline 3 November 2006 Comments

October 2004 6 July 2006

29 May 2008

Comment deadline 29 September 2008

29 May 2008

Comment deadline 29 September 2008

11 March 2010

Comment deadline 16 July 2010

28 September 2010

Completion of Phase A, effectively immediately applicable

Current status of the project:

During late 2010, the Board effectively delayed further work on the joint project until after other more urgent convergence projects were finalized, the IASB decided in September 2012 to reactivate the Conceptual Framework project as an IASB-only comprehensive project.

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Advantages of a conceptual framework:

1. A conceptual framework is useful in the development of more consistent and logical standards. 2. It useful in removing the necessity to re debate conceptual issues when preparing new accounting standards. 3. It can lead to better communication among accountants, auditors and users because all parties are using a common set of definitions and criteria. 4. It has a potential to reduce the activities and influence of lobbies and interest groups.

2.4)

Conceptual framework issues:

Issue 1: Balance sheet versus profit and loss account orientation. Issue 2: Definition of assets, liabilities, equity, revenues and expenses. Issue 3: Concepts of capital maintenance. Issue 4: Which measurement method should be adopted? Issue 5: Applicability of the conceptual framework to the public sector.