Control of an economic resource

Control of an economic resource – This is all about: A present economic resource controlled by the entity as a result of past events.

Two very simple examples to start with:

Pat Co has purchased a patent for $20,000. The patent gives the company sole use of a particular manufacturing process which will save $3,000 a year for the next five years.

This is an asset, albeit an intangible one. There is a past event, control and future economic benefit (through cost savings).

Baldwin Co (the company) paid Don Brennan $10,000 to set up a car repair shop, on condition that priority treatment is given to cars from the company’s fleet.

This cannot be classified as an asset. Baldwin Co

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Primary users of general purpose financial reports

primary users of general purpose financial reports that are existing and potential investors, lenders and other creditors who use that to make finance decisions

Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Role of Financial Reporting

The Role of Financial Reporting – How does financial reporting information fit into business? Financial reporting ultimately serves a number of different desired outcomes. One of these is economic growth. It does not promote growth directly; instead, growth is promoted through a number of subordinate outcomes. One of these could be described as good business performance. This in turn is promoted through subordinate outcomes that could be described as good business decisions and good management. Financial reporting information is one type of information that helps people understand whether desired outcomes are being achieved. Have good decisions been made? Have they been well implemented? Have they led to good performance?

Good business decisions covers all business-related decisions by investors, lenders, … Read more

What are IFRS Financial Statements?

What are IFRS Financial Statements – The objective of financial statements is to provide financial information about the reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the reporting entity and in assessing management’s stewardship of the entity’s economic resources.

A content page of IFRS Financial Statement may look similar to the following content listing: What are IFRS Financial Statements?

  • Statement of Financial Position: This is also known as the balance sheet. IFRS prescribes the ways in which the components of a balance sheet are reported. This statement recognises assets, liabilities and equity. This comprises information about a reporting entity’s economic resources,

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Stewardship and agency theory

Stewardship and agency theory – This part is a more detailed explanation of the revised Conceptual Framework for Financial Reporting 2018 (Conceptual Framework) issued by the International Accounting Standards Board (IASB) regarding Control as part of chapter 4 – The Elements of Financial Statements, section 4.25 on one party (a principal) engaging another party (an agent) to act on behalf of, and for the benefit of, the principal.

The view of ‘stewardship’ given in the current Conceptual Framework mentions that management are accountable to the entity’s capital providers for the custody and safekeeping of the entity’s economic resources and for their efficient and profitable use, including protecting them from unfavorable economic effects such as inflation and technological changes. Management … Read more