Conceptual Framework In Financial Accounting

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A- The nature, components, and the objectives of the conceptual framework of accounting:
A.1- Nature of Conceptual Framework:
Conceptual framework is a well-recognized instrument used to classify and identify the environment about financial accounting and the information required. Moreover, it is logical, reasonable, dynamic, comprehensive but concise, flexible to allow for change, and conscious of other frameworks standards and classifications.
The primary purpose of conceptual framework principles is to provide and develop a coherent set of standards and rules to be-used in solving and coping with new and emerging financial accounting practical problems.
A.2- Conceptual Framework Components:
A.2.1- Basic Objectives:
• Provide useful Information
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A.2.5- Basic Principles:
• Historical cost: Provides measures about the firm 's assets, liabilities, income and expenses by information derived from the transaction or event created them.
• Revenue recognition: Revenue to be-recognized when it is possible that future benefits will flow to the firm and measurement of its amount is possible.
• Matching: firm recognize expenses once the product or the work actually contributes to revenue.
• Full disclosure: Provide complete, sufficient, and accurate information that influence the judgment and decisions of knowledgeable user.
A.2.6- Constrains:
• Cost-benefit: Firm must weighs the costs of providing the information against the benefits derived from using it.
• Materiality: When the presence or absence of an item effect or change the decision and judgment of a rational person.
• Industry practice: The unique nature of some business and industries sometimes demands departure from basic theory. I.e. In public industry, fixed assets reported in the balance sheet to show the industry’s capital-intensive nature. While agricultural crops reported at market value, because it is expensive to develop accurate cost statistics on individual
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The period of these investments divided to (Sort-term and Long-term) investments.
B.3- Accounting Procedures of the Investments:
The accounting procedures used to record investments related directly to the purpose of the investment.
B.3.1- Passive Investments in Debt and Equity Securities:
Investors make this type of investments to make a high rate of profit on funds to use them in future. This kind of investments includes:
a) Investments in equity securities: the investing company holds less than 20% of the other company’s outstanding voting shares. The cost method used in measuring and reporting these investments.
b) Investments in debt securities: If investments sold before maturity, then they will treat as equity securities using the cost method. In contrast, if the company holds investments until the maturity date, then investments will measured and reported at amortized-cost.
B.3.2- Investments in Stock for Significant Influence:
Investments owned by the company in another business 's stock in order to influence or control that business. Significant influence exists when the investing company owns 20%-50% of the outstanding voting shares. The accounting procedure used to measure and report this type of investment is equity
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