CONCEPTUAL FRAMEWORK

Summary of the terms and

concepts that underlie the
preparation and presentation of FS
for external users.
Provide a theoretical foundation for
accounting which will guide
standard-setters, preparers and
users of FS.
Concerned with general-purpose
FS, including consolidated financial
statements
Do not include about making of the
special purpose FS
Purpose
1. To assist the FRSC in developing
accounting standards that will
represent Philippine GAAP.
2. To assist preparers of FS in applying
accounting standards and in
dealing with issues not yet covered
by GAAP.
3. To assist FRSC in its review and
adoption of IFRS
4. To assist users in interpreting
information.
5. To assist auditors in forming an
opinion as to the FS conformity to
GAAP
6. To provide information to those
interested in the work of the FRSC
in the formulation of PFRS
Limitation
1. This is just a basis or the general
concept of accounting. If there are
any standard or an interpretation
that specifically applies to a
transaction, these standards will
prevail over the Conceptual
Framework.
Accounting Assumptions
basic notions or fundamental
premises on which the accounting
process is based or called as
postulates.
1. Going Concern
in the absence of evidence
to the contrary, the
accounting entity is viewed
as continuing in operation
indefinitely.
2. Accounting Entity
the entity is separate from
its owners, managers and
employees who constitute
the entity.

3. Time Period
Requires that the indefinite
life of an entity is subdivided
into time periods or
accounting periods which are
usually of equal length for
the purpose of preparing
financial reports.
4. Monetary Unit (Stability of the
Peso)
Single monetary unit will be
used
Purchasing power of the
peso is stable or constant
and that its instability is
insignificant and therefore
may be ignored.

Scope of Conceptual Framework

1. Objective of financial reporting
2. Qualitative characteristics of useful
financial information
3. Definition, recognition and
measurement of the elements from
which FS are constructed
4. Concepts of capital and capital
maintenance

Financial Reporting
The provision of financial
information about an entity to
external users that is useful to
them in making economic decisions
and for assessing the effectiveness
of the entitys management
Includes not only the FS but also
other important information that
might affect the entity as a whole.
Nonfinancial information are also
reported other than financial
information.
Objective of Financial Reporting
To provide financial information
about the reporting entity that is useful to
existing and potential investors, lenders
and other creditors in making decisions
about providing resources to the entity.
(The why of accounting)
Specific objectives of financial
reporting
1. To provide information useful in
making decisions about providing
resources
2. To provide information useful in
assessing the prospects of future
net cash flows to the entity.

3. To provide information about entity

resources, claims and changes in
resources and claims.
Limitation:
a. It cannot provide all the
information
b. Users need to consider pertinent
information from other sources, for
example, general economic
conditions, political events and
industry outlook.

QUALITATIVE CHARACTERISTICS
are the qualities or attributes that
make financial accounting
information useful to the users.
Has two components: Fundamental
and Enhancing

Fundamental Qualitative
Characteristics

Relate to the content or substance

of financial information

1. Relevance