The Conceptual Framework

The Conceptual Framework for Financial Reporting (revised March 2018) sets out the concepts the IASB uses to develop standards. It also helps preparers develop a policy when no standard applies. It is not a standard: nothing in it overrides a requirement of an IFRS Accounting Standard.

Objective. General purpose financial reports give existing and potential investors, lenders and other creditors information that helps them decide whether to provide resources to the entity, and assess management's stewardship of those resources.

Qualitative characteristics. Information is useful if it is: - Relevant (fundamental) — it can make a difference to decisions because it has predictive or confirmatory value. Materiality is an entity-specific aspect of relevance: information is material if omitting, misstating or obscuring it could reasonably be expected to influence users' decisions. - A faithful representation (fundamental) — complete, neutral and free from error. Neutrality is supported by prudence: caution when making judgements under uncertainty, so that assets and income aren't overstated and liabilities and expenses aren't understated — without deliberately going the other way. - Enhanced by comparability, verifiability, timeliness and understandability. These improve useful information but can't make irrelevant or misrepresented information useful. - Subject to the cost constraint: the benefits of reporting should justify its costs.