[90500][3.1][4 credits] Describe and Apply the conceptual basis of accounting in context

Solvency
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Terms in this set (26)
Solvency
The ability to meet maturing obligations as they fall due
Accounting Entity
The financial affairs of an entity must be kept separate and distinct from those of the owner and other entities
Monetary Measurement
All transactions are measured in New Zealand dollar terms
Period Reporting
In order to provide timely information, we divide the business into periods of equal length
Understandability
When users may be reasonably expected to comprehend the meaning of accounting information
Comparability
Users are able to identify similarities and differences between information in that report with information in other reports
Neutrality
Information contained in financial statements must be free from bias
Timeliness
Information has no use if it becomes available after it was needed to make a decision
Faithful Representation
Information truthfully shows the effects of a transaction or other event
Materiality
An item is considered material if its omission or misstatement could influence the economic decisions of users taken on the basis of financial statements
Going ConcernThe business is expected to continue into the foreseeable future with no intention to liquidate or curtail operationsHistorical CostAssets are recorded at the amount paid (or payable) at the time of acquisitionAccrual BasisWe recognize transactions when they occur, reporting them in the periods they relate to.ReliabilityInformation is reliable when free from material error and bias and can be depended on by users to represent faithfully that which it intends to represent or could be reasonably expected to presentRelevanceIt is relevant if it influences the economic decisions of users by helping them evaluate past, present or future events, or confirming, or correcting their past evaluationsCompletenessTo be reliable, the information in financial statements must be complete within the bounds of materiality and costSubstance over FormInformation should be reported in their economic reality, not how things look on paperAssetsResources controlled by an entity as a result of a past events and from which future economic benefits are expected to flow to the entityLiabilitiesPresent obligations 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 benefitsOwners EquityThe residual interest in the assets of an entity after deduction of its liabilities. The difference between assets and liabilities.IncomeIncreases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from ownersExpensesDecreases in economic benefits during the accounting period in the form of outflows or depletions of assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to ownersRealisable ValueAssets are recorded at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposalsExempt Companies• Income less than $1 million • Total assets less than $450,000 • Not a subsidiary of another company, and does not have any subsidiary companies • Free of any legal reporting requirements • No public accountabilityDifferential Reporting• No public accountability • Entities (which would otherwise be exempt) where 5% or more of the owners request financial statements that comply with differential NZ GAAP At least two of: • Income less than $20 million • Total assets less than $10 million • Less than 50 employeesFull Compliance• Public Accountability • Issuer (ie. has made a public issue of debt or equity securities) • Entities where 5% or more of the owners request financial statements that comply with differential NZ GAAP Any two of: • Income greater than $20 million • Total assets greater than $10 million • More than 50 employees