The purpose and status of the IASB framework


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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.

IFRS framework defines the basic concepts and prepare for the presentation of financial statements for external users submit. IFRS framework serves as a guide to the Council for further development of IFRS, and as a guideline for resolution of accounting issues are addressed indirectly as the International Accounting Standard or International Financial Reporting Standard or Interpretation.

The IFRS refers to:

Purpose financial statements

• The primary users of financial reporting with general purpose present and potential investors, lenders and other creditors who use this information to make decisions regarding the purchase to make, sell or hold shares or debt instruments and providing loans or creating or other forms of credit.

• Primary users need information on the resources of the subject is not only the prospects of an entity to future net cash flows to evaluate, but also how to effectively and efficiently manage their responsibilities, resources existing company used to download it.

• IFRS framework suggests that the general purpose financial reports can not all information users need to make economic decisions. They will have important information from other sources to consider as well.

• IFRS framework indicates that other parties, including economic and market regulators can find financial reports useful general purpose. However, the Council considers that the objectives of financial reporting and general objectives of financial regulation cannot be consistent. Therefore, regulators are not considered as a primary user of financial reports and general purpose are not directed primarily to the regulators or other parties.

Useful features of the quality of financial information

Qualitative characteristics are the characteristics that information useful in the financial statements to be used. Four principal qualitative characteristics are understood, reliability and comparability importance. In practice a balancing, or trade-offs between qualitative characteristics is often necessary.

Recognition and Measurement financial statements, elements of the definition is built

Financial statements reflect the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics. These broad classes are called elements of financial statements.

The elements directly related to the measurement of financial position are assets, liabilities and equity and to performance (income statement) are income and expense.

Concepts of capital and capital maintenance

The concept of preservation of capital with an entity determines how capital, which seeks to maintain, and provides a link between the concepts of capital and the concepts of profit because it provides a reference point by which to measure profit, but it is a prerequisite to distinguish between return entity on capital and return, capital and net assets received exceed the amounts needed to maintain the capital can be considered a profit and thus return on equity.

The recent exposure draft for financial liabilities

This exposure draft is part of the overall project of the IASB to replace IAS 39 in its entirety. ED 196 proposals about how gains and losses on liabilities attributable to the fair value option should be reflected in the income statement. The exposure draft indicates that changes in the credit risk of a liability would not affect profit or loss unless it is advertised as being busy trading. A standard is expected to be released in the second quarter of 2011.

In Contrast: Exposure Draft

Recognition and measurement determines the conditions for recognition and measurement of financial assets and financial liabilities and some contracts to buy or sell non-financial items.

Many users of financial statements and other interested persons to the Council that the requirement in IAS 39 is difficult to understand, apply and interpret, and urged the Council to a new level of financial reporting for financial instruments that are principle-based and less complex to develop.

Since 2005, the IASB and the U. S. Financial Accounting Standards Board (FASB) has a long-term goal to improve and simplify reporting for financial instruments. This work led to the publication of a discussion paper, reducing complexity in reporting financial instruments, in March 2008.

In April 2009, in response to data obtained in their work in response to financial crisis, and after G20 leaders conclusions and recommendations of international organizations like the Financial Stability Council, boards announced an accelerated timetable to replace financial instruments their respective standards.

The efforts of the boards' to create a common financial instruments and improved standard are complicated by the establishment of various project schedules to respond to their different parties in light of the financial crisis reached.

In July 2009 the IASB issued an exposure draft contains proposals for the classification and measurement for all items within the scope of IAS 39. In this exposure draft, the Council also stressed the discussion paper IASB measure credit risk liability in June 2009 was published.

In their response to exposure draft and discussion paper, many expressed concern about the recognition of gain or loss from the effects of changes in credit risk of financial obligations.

During its deliberations leading to the exposure draft, the Council discussed various approaches to dealing with the effects of changes in the credit risk of liabilities. Based on feedback received from the Financial Instruments Working Group and users, regulators, preparers, auditors and others, the Board decided that none of these methods will be less complex or result in more useful information than IAS 39 requirements. As a result, the Board decided to retain the existing requirements for the classification and measurement of financial liabilities, except for certain requirements about fair value option. On the question of credit risk, this exposure draft contains proposals for how gains and losses from its obligations under fair value option should be presented in the income statement.


Therefore, for the purposes of measuring the effects of changes in the credit risk of a liability, the exposure draft proposes to use the guidance in IFRS. Under the proposals, the default method would be carried forward but entities would be permitted to use a different method if it provides a more faithful representation of the amount of the change in fair value that is attributable to changes in the liability's credit risk.

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