Introduction to the Preparation and Presentation of Financial Statements
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CHAPTER 1INTRODUCTION TO THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTSPage1.1Outcomes for the chapter1 – 21.2Financial accounting 188 knowledge1 – 2CONCEPTUAL FRAMEWORK1.3Objective of the conceptual framework 1 – 31.4Scope of the framework1 – 31.5Underlying assumptions1 – 61.6Elements of financial statements1 – 61.7Recognition of elements of financial statements1 – 91.8Measuring the elements of financial statements1 – 10PRESENTATION OF COMPANIES ANNUAL FINANCIAL STATEMENTS1.9Introduction1 – 121.10General requirements in terms of the Companies Act of 20081 – 121.11Faithful representation of company financial statements1 – 121.12Complete set of financial statements1 – 131.13General features of financial statements1 – 131.14Structure and content of financial statements1 – 161.15Schematic representation1 – 371.16Income tax of companies1 – 38CHAPTER 1INTRODUCTION TO THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS1.1 THE OUTCOMES FOR THE CHAPTER ARE TO:1.1.1 understand the conceptual framework.1.1.2 identify and define the elements of financial statements.
1.1.3 apply the recognition and measurement principles of the elements of financial statements.1.1.4 distinguish between the components of financial statements.understand and be able to discuss the overall considerations for the compilation of financial statements.understand and be able to apply the structure and contents of financial statements to a given set of facts.1.2 FINANCIAL ACCOUNTING 188 KNOWLEDGEThe following topics have been discussed in Financial Accounting 188 and you should be able to:understand the conceptual frameworkidentify and define the elements of financial statementsapply the recognition and measurement principles of the elements of financial statementsprepare company financial statements to comply with the minimum requirements of International Financial Reporting Standards and the companies act.CONCEPTUAL FRAMEWORK [pic 1]1.3 OBJECTIVE OF THE CONCEPTUAL FRAMEWORKThe objective of the conceptual framework (hereafter referred to as the framework) is to lessen the different circumstances that lead to the use of various definitions and recognition criteria which are used for the preparation of financial statements. At the same time the use of financial statements for decision making will be enhanced.SCOPE OF THE FRAMEWORK1.4.1 Objective of general purpose financial reporting The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors (primary users) in making decisions about providing resources to the entity. General purpose financial statements cannot provide all the information that is needed by users. Users also have to consider general economic conditions, political events and the industry in which the entity operates in their decision making process. The financial statements are not directed at regulators, management of the entity and the general public, but they can still use it.