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Section 2 – Introduction
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Section 2 – Analysis
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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Section Downloads
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Contents
2.2 Objective of financial statements.
2.2.1 Extract from FRS102: Section 2.1A-2.3.
2.3 Qualitative characteristics of information in financial statements.
2.3.1 Extract from FRS102: Section 2.4-2.14.
2.4 Definition of an asset and recognition criteria.
2.4.1 Extract from FRS102: Section 2.15(a), Section 2.17-2.19, Section 2.29 and Section 2.37-2.38.
2.4.2.2 When an asset is to be recognised.
2.5 Definition of a liability and recognition criteria.
2.5.2.2 Recognition criteria for a liability.
2.6.1 Extract from FRS102: Section 2.15(c) and Section 2.22.
2.7 Definition and recognition of Income/revenue.
2.7.1 Extract from FRS102: Section 2.23(a), Section 2.25 and Section 2.41.
2.7.2.2 Identifying revenue from other income/gains.
2.7.2.3 Recognition of income.
2.8 Definition and recognition of expenses.
2.8.1 Extract from FRS102: Section 2.23(b), Section 2.26 and Section 2.42.
2.8.2.1 Definition of an expense.
2.8.2.2 Recognition of an expense.
2.8.2.3 Identifying expenses from losses.
2.8 Measurement of assets, liabilities, income and expenses.
2.8.1 Extract from FRS102: Section 2.33-.2.34.
2.9 Pervasive recognition and measurement principles.
2.9.1 Extract from FRS102: Section 2.35.
2.10.1 Extract from FRS102: Section 2.36.
2.11 Recognition in financial statements.
2.11.1 Extract from FRS102: Section 2.43-2.45.
2.12.1 Extract from FRS102: Section 2.52.
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Downloads
Section 2 Concepts and Pervasive Principles Quick Guide (PDF) (93 downloads )
Summary
Section 2 describes the objective of financial statements, which is to provide useful information about the entity’s financial position, performance and cash flows, and establishes the concepts and underlying principles of preparation.
What is different?
FRS 102 has more qualitative characteristics than old GAAP.
Although the wording may differ between old GAAP and FRS 102, they are very similar in regard to the basic principles.
What are the key points?
Section 2 sets out a list of qualitative characteristics which are used when assessing whether financial statements meet their objectives namely; understandability, relevance, materiality, reliability, substance over form, prudence, completeness, comparability, timeliness and balance between benefit and cost.
Financial statements are required to show a true and fair view and should be prepared on an accruals basis.
Section 2 defines an asset as a resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.
A liability is defined as a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Assets, liabilities, income and expenses are recognised where it is probable that any associated future economic benefit will flow to or from the entity, and where the item has a cost or value that can be measured reliably.
In general, assets and liabilities are initially measured at historical cost unless there is a specific requirement elsewhere in the FRS to measure them at fair value. Subsequent measurement depends on the type of balance and will be based on one of the following:
- Amortised cost (for most basic financial assets and liabilities);
- Fair value (for other financial assets and liabilities, investments in associates and joint
ventures (if chosen), investment properties, and some agricultural assets);
- The cost model or revaluation model (for property, plant and equipment and intangible assets);
- The lower of cost and selling price less costs to complete and sell (for inventory); and
- The best estimate of the amount that would be required to settle the obligation at the
reporting date (for most non-financial liabilities)
What do accountants need to do?
Ensure that partners and staff know the principals that underline FRS 102.
What do companies need to do?
Ensure that owners/accountants know the principals that underline FRS 102.
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Examples
Example 1: Turnover/revenue versus other income.
Example 2: Turnover/revenue versus other income.
Example 3: Turnover/revenue versus other income.
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Section 2 Concepts and Pervasive Principles Detailed Guide (PDF) (119 downloads )
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Downloads
FRS 102 35 Part Differences Quick Guide (859 downloads )
FRS 102 35 Part Differences Guide (581 downloads )
FRS 102 Differences on Transition Checklist (1119 downloads )
FRS 102 Differences on Transition Examples Appendix (1092 downloads )
Fillable Differences on Transition Checklist (866 downloads )
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