MARCO CONCEPTUAL

2012

Technical Summary

The Conceptual Framework for Financial Reporting 2011

as issued at 1 January 2012

This extract has been prepared by IFRS Foundation staff and has not been approved by the IASB. For the requirements

reference must be made to the Conceptual Framework for Financial Reporting 2010.

The IASB Framework was approved by the IASC Board in April 1989 for publication in July 1989, and

adopted by the IASB in April 2001. In September 2010, as part of a bigger project to revise the Framework

the IASB revised the objective of general purpose financial reporting and the qualitative characteristics of

useful information. The remaining of the document from 1989 remains effective.

This Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial

statements for external users.

The Conceptual Framework deals with:

(a) the objective of financial reporting;

(b) the qualitative characteristics of useful financial information;

(c) the definition, recognition and measurement of the elements from which financial statements are

constructed; and

(d) concepts of capital and capital maintenance.

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 in making decisions about

providing resources to the entity. Those decisions involve buying, selling or holding equity and debt

instruments, and providing or settling loans and other forms of credit. Many existing and potential investors,

lenders and other creditors cannot require reporting entities to provide information directly to them and must

rely on general purpose financial reports for much of the financial information they need. Consequently, they

are the primary users to whom general purpose financial reports are directed.

General purpose financial reports do not and cannot provide all of the information that existing and potential

investors, lenders and other creditors need. Therefore those users need to consider pertinent information from

other sources. Other parties, such as regulators and members of the public other than investors, lenders and

other creditors, may also find general purpose financial reports useful. However, those reports are not primarily

directed to these other groups..

In order to meet their objectives, financial statements are prepared on the accrual basis of accounting. Accrual

accounting depicts the effects of transactions and other events and circumstances on a reporting entity’s

economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts

and payments occur in a different period. This is important because information about a reporting entity’s

economic resources and claims and changes in its economic resources and claims during a period provides a

better basis for assessing the entity’s past and future performance than information solely about cash receipts

and payments during that period.

The financial statements are normally prepared on the assumption that an entity is a going concern and will

continue in operation for the foreseeable future.

Qualitative characteristics identify the types of information that are likely to be most useful to the existing and

potential investors, lenders and other creditors for making decisions about the reporting entity on the basis of

information in its financial report (financial information). If financial information is to be useful, it

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