Conceptual Framework for Financial Reporting

1 March 2018 Conceptual Framework for Financial ReportingIFRS Conceptual FrameworkConceptual Frameworkfor Financial ReportingConceptual Framework for Financial Reportingis issued by the International Accounting Standards Board(Board).Disclaimer:To the extent permitted by applicable law, the Board and the IFRS Foundation(Foundation) expressly disclaim all liability howsoever arising from this publication or anytranslation thereof whether in contract, tort or otherwise to any person in respect of anyclaims or losses of any nature including direct, indirect, incidental or consequential loss,punitive damages, penalties or contained in this publication does not constitute advice and should not besubstituted for the services of an appropriately qualified for this part: 978-1-911040-90-3 ISBN for complete publication (two parts): 978-1-911040-89-7 Copyright 2018 IFRS FoundationAll rights reserved.

2 Reproduction and use rights are strictly limited. Please contact theFoundation for further details at of IASB publications may be obtained from the Foundation s PublicationsDepartment. Please address publication and copyright matters to orvisit our web shop at Foundation has trade marks registered around the world (Marks) including IAS , IASB , the IASB logo, IFRIC IFRS , the IFRS logo, IFRS for SMEs , theIFRS for SMEs logo,the Hexagon Device , International Accounting Standards , International FinancialReporting Standards , NIIF and SIC . Further details of the Foundation s Marks areavailable from the Foundation on Foundation is a not-for-profit corporation under the General Corporation Law of theState of Delaware, USA and operates in England and Wales as an overseas company(Company number FC023235) with its principal office at 30 Cannon Street, London,EC4M AND PURPOSE OF THECONCEPTUAL 1 THE OBJECTIVE OF GENERAL PURPOSEFINANCIAL , USEFULNESS AND LIMITATIONS OF GENERAL PURPOSEFINANCIAL ABOUT A Reporting ENTITY S ECONOMIC RESOURCES.

3 CLAIMS AGAINST THE ENTITY AND CHANGES IN RESOURCES AND resources and in economic resources and performance reflected by accrual performance reflected by past cash in economic resources and claims not resulting from ABOUT USE OF THE ENTITY S ECONOMIC 2 QUALITATIVE CHARACTERISTICS OF USEFULFINANCIAL CHARACTERISTICS OF USEFUL Financial qualitative qualitative COST CONSTRAINT ON USEFUL Financial 3 Financial STATEMENTS AND THEREPORTING ENTITYFINANCIAL and scope of Financial adopted in Financial concern Reporting and unconsolidated Financial 4 THE ELEMENTS OF Financial OF AN to produce economic FORFINANCIALREPORTING IFRS Foundation3 DEFINITION OF A of an economic obligation as a result of past AND of of contractual rights and contractual OF OF INCOME AND 5 RECOGNITION AND DERECOGNITIONTHE RECOGNITION 6 PROVIDED BY PARTICULAR MEASUREMENT TO CONSIDER WHEN SELECTING A MEASUREMENT qualitative characteristics and the cost specific to initial than one measurement OF MEASUREMENT 7 PRESENTATION AND DISCLOSUREPRESENTATION AND DISCLOSURE AS COMMUNICATION AND DISCLOSURE OBJECTIVES AND of assets and of FORFINANCIALREPORTING MARCH2018 IFRS Foundation4 Classification of income and 8 CONCEPTS OF CAPITAL AND CAPITALMAINTENANCECONCEPTS OF OF CAPITAL MAINTENANCE AND THE DETERMINATION MAINTENANCE DEFINED TERMSAPPROVAL BY THE BOARD OF THECONCEPTUALFRAMEWORK FOR Financial REPORTINGISSUED INMARCH 2018 CONCEPTUALFRAMEWORK FORFINANCIALREPORTING IFRS Foundation5 STATUS AND PURPOSE OF THECONCEPTUAL Framework for Financial Reporting ( Conceptual Framework )

4 Describesthe objective of, and the concepts for, general purpose Financial Reporting . Thepurpose of theConceptual Frameworkis to:(a)assist the International Accounting Standards Board (Board) to developIFRS Standards (Standards) that are based on consistent concepts;(b)assist preparers to develop consistent accounting policies when noStandard applies to a particular transaction or other event, or when aStandard allows a choice of accounting policy; and(c)assist all parties to understand and interpret the Frameworkis not a Standard. Nothing in theConceptual Frameworkoverrides any Standard or any requirement in a meet the objective of general purpose Financial Reporting , the Board maysometimes specify requirements that depart from aspects of theConceptualFramework. If the Board does so, it will explain the departure in the Basis forConclusions on that Frameworkmay be revised from time to time on the basis of theBoard s experience of working with it.

5 Revisions of theConceptual Frameworkwillnot automatically lead to changes to the Standards. Any decision to amend aStandard would require the Board to go through its due process for adding aproject to its agenda and developing an amendment to that Frameworkcontributes to the stated mission of the IFRSF oundation and of the Board, which is part of the IFRS Foundation. That missionis to develop Standards that bring transparency, accountability and efficiency tofinancial markets around the world. The Board s work serves the public interestby fostering trust, growth and long-term Financial stability in the globaleconomy. TheConceptual Frameworkprovides the foundation for Standards that:(a)contribute to transparency by enhancing the internationalcomparability and quality of Financial information, enabling investorsand other market participants to make informed economic decisions.

6 (b)strengthen accountability by reducing the information gap between theproviders of capital and the people to whom they have entrusted theirmoney. Standards based on theConceptual Frameworkprovideinformation needed to hold management to account. As a source ofglobally comparable information, those Standards are also of vitalimportance to regulators around the world.(c)contribute to economic efficiency by helping investors to identifyopportunities and risks across the world, thus improving capitalallocation. For businesses, the use of a single, trusted accountinglanguage derived from Standards based on theConceptual Frameworklowers the cost of capital and reduces international Reporting FORFINANCIALREPORTING MARCH2018 IFRS Foundation6fromparagraphCHAPTER 1 THE OBJECTIVE OF GENERAL PURPOSEFINANCIAL , USEFULNESS AND LIMITATIONS OF GENERAL PURPOSEFINANCIAL ABOUT A Reporting ENTITY S ECONOMIC RESOURCES,CLAIMS AGAINST THE ENTITY AND CHANGES IN RESOURCES AND resources and in economic resources and performance reflected by accrual performance reflected by past cash in economic resources and claims not resulting from ABOUT USE OF THE ENTITY S ECONOMIC FORFINANCIALREPORTING IFRS objective of general purpose Financial Reporting forms the foundation of theConceptual Framework .

7 Other aspects of theConceptual Framework the qualitativecharacteristics of, and the cost constraint on, useful Financial information, areporting entity concept, elements of Financial statements, recognition andderecognition, measurement, presentation and disclosure flow logically fromthe , usefulness and limitations of general purposefinancial objective of general purpose Financial reporting1is to provide financialinformation about the Reporting entity that is useful to existing and potentialinvestors, lenders and other creditors in making decisions relating to providingresources to the decisions involve decisions about:(a)buying, selling or holding equity and debt instruments;(b)providing or settling loans and other forms of credit; or(c)exercising rights to vote on, or otherwise influence, management sactions that affect the use of the entity s economic decisions described in paragraph depend on the returns that existingand potential investors, lenders and other creditors expect, for example,dividends, principal and interest payments or market price increases.

8 Investors ,lenders and other creditors expectations about returns depend on theirassessment of the amount, timing and uncertainty of (the prospects for) futurenet cash inflows to the entity and on their assessment of management sstewardship of the entity s economic resources. Existing and potential investors,lenders and other creditors need information to help them make make the assessments described in paragraph , existing and potentialinvestors, lenders and other creditors need information about:(a)the economic resources of the entity, claims against the entity andchanges in those resources and claims (see paragraphs ); and(b)how efficiently and effectively the entity s management and governingboard3have discharged their responsibilities to use the entity s economicresources (see paragraphs ). existing and potential investors, lenders and other creditors cannotrequire Reporting entities to provide information directly to them and must rely1 Throughout theConceptual Framework , the terms Financial reports and Financial Reporting refer togeneral purpose Financial reports and general purpose Financial Reporting unless specificallyindicated Throughout theConceptual Framework , the term entity refers to the Reporting entity unlessspecifically indicated Throughout theConceptual Framework , the term management refers to management and thegoverning board of an entity unless specifically indicated FORFINANCIALREPORTING MARCH2018 IFRS Foundation8on general purpose Financial reports for much of the Financial information theyneed.

9 Consequently, they are the primary users to whom general purposefinancial reports are , general purpose Financial reports do not and cannot provide all of theinformation that existing and potential investors, lenders and other creditorsneed. Those users need to consider pertinent information from other sources,for example, general economic conditions and expectations, political events andpolitical climate, and industry and company purpose Financial reports are not designed to show the value of areporting entity; but they provide information to help existing and potentialinvestors, lenders and other creditors to estimate the value of the primary users have different, and possibly conflicting, informationneeds and desires. The Board, in developing Standards, will seek to provide theinformation set that will meet the needs of the maximum number of primaryusers.

10 However, focusing on common information needs does not prevent thereporting entity from including additional information that is most useful to aparticular subset of primary management of a Reporting entity is also interested in Financial informationabout the entity. However, management need not rely on general purposefinancial reports because it is able to obtain the Financial information it parties, such as regulators and members of the public other thaninvestors, lenders and other creditors, may also find general purpose financialreports useful. However, those reports are not primarily directed to these a large extent, Financial reports are based on estimates, judgements andmodels rather than exact depictions. TheConceptual Frameworkestablishes theconcepts that underlie those estimates, judgements and models. The conceptsare the goal towards which the Board and preparers of Financial reports with most goals, theConceptual Framework s vision of ideal Financial reportingis unlikely to be achieved in full, at least not in the short term, because it takestime to understand, accept and implement new ways of analysing transactionsand other events.