Financial accounting standards Essay

The income statement, which portrays the monetary performance of the company, is also described in the financial statements elements. Income and expenses from ordinary activities argon recognized as the main elements of such statement, which when matched give in a profit or loss for the period. hood caution adjustments ar also pointed out, which may effect the income statement. This arises from the restatement of assets and liabilities that may eventually mold the faithfulness of the firm (International history Standards 2000, p 61-64).The measurement bases utilized in order to compute the monetary amounts of the assets, liabilities, equity, revenue and exp decisioniture noted higher up are also outlined in the framework. There are flipper main measurement bases recognized in the accounting framework, which are explained beneath Historical Cost such measurement bases states that assets are recorded at the historical, which is normally the date of purchase. This implie s that the valuate of the asset at the date of achievement is the one portrayed in the Balance Sheet. For example, if a motor fomite costing $8,000 is bought.The $8,000 historical cost cling to will be adopted as its measurement bases. As regards liabilities, the amount of cash obligation arising at the inception of the transaction will also be utilized as the measurement means. Any payments that are eventually undertaken to cover such indebtedness are diminished from that amount. This is most common method adopted in practice by business organizations. However, when the need arises, such measurement bases are promulgated with other methods in order to portray a to a greater extent true and fair financial picture (International be Standards 2000, p 70-71). latest Cost as its name implies, assets are recorded at the menstruum amount of cash and cash equivalents that would be required if a analogous was going to be purchased. Under such measurement bases, liabilities are det ermined according to the undiscounted cash obligation necessary to settle such cargo (International Accounting Standards 2000, p 70). Realizable value this method is similar to the certain cost one, with the exception that assets value is computed in line with the equivalent charge that the save asset can attain if disposed in the market.The value of liabilities under such measurement bases is the same to the historical cost one. That is liabilities are determined in line with their settlement value (International Accounting Standards 2000, p 70). Present value this encompasses that assets are recording according to the present discounted value of the envisaged cash inflows that such asset will provide to the organization in its day-to-day business activities. Liabilities are also valued at the present discounted value of the expected cash outflows entailed in the foreseeable future (International Accounting Standards 2000, p 70).The concept of capital and capital maintenanc e is the last basal principle covered by the accounting framework. The principle of capital under a financial side comprises the invested assets by the owner, which are identical to the equity or net assets value. Under the physical concept of capital, it entails the operating ability. That is the nut-bearing power of the organization (International Accounting Standards 2000, p 72).The concept of capital mentioned in the previous paragraph leads to the proceeding concepts of capital maintenance Financial Capital tutelage profit/loss is computed under such concept as the difference between the financial value of the net assets at the end of the year and the financial value of the net assets at the commencement of the financial year (International Accounting Standards 2000, p 72). The fair value measurement bases, which is a new valuation method abides with such concept. Physical Capital Maintenance profit in this case focuses on the productive ability of the corporation.That is the oversupply of physical production at the end of the year when compared with that of the beginning forms up the profit figure (International Accounting Standards 2000, p 73). 2. The principles outlined in the framework do not exercise a direct influence on the intended parties. It holds an indirect affect by affecting the accounting standards issued by the recognized accountancy board. Such accounting standard will indeed have a direct influence on the accounting preaching of specific items and on the presentation of accounting information.Indeed the framework acts as a yardstick that guides the development of accounting standards. It is a generic entry that narrows the range of alternatives that can be adopted during the standard setting exhibit (Foster M. J. et al 2001, p 1,2).Further more, the framework aids the communication process in the Financial Accounting Standards Board, both internally and externally. Through the word meaning of a generally accepted accounting f ramework, the message of the Financial Accounting Standards Board would be more easy to be communicated to accountants in the single industries (Foster M. J. et al 2001, p 2).