ACCOUNTING THEORY

SFAC 7 & 8

RENZY PERMATA SARI

HARFINA AULYA

AGNES NURSELLA

RUTH MAGDALENA

Measurement in accounting by using the present value can be

used to capture and to develop the difference between the expected

cash flow in the future

Providing relevant information through financial reporting as

describe some of the attributes present value measurement of assets and liabilities logically.

GOALS OF SFAC

NO. 7

international137

IAS 37 establishes accounting and disclosurerequirements for provisions, contingentliabilities and contingent assets, with someexceptions, establishes the important principlethat the provision should be recognized onlywhen the entity has a liability provisions.

PRESENT VALUE

FAIR VALUE

The present value is the only goal, a statement which distinguishes Present Value established to capture the elements that taken together will describe the market price, and if one does not exist, it will describe the fair value.

1. The interest rate and the estimated cash flows

2. The interest rate used to discount flows

3. Estimated cash flow interest rate

GENERAL PRINCIPLES

RELEVANCE

REALIBILITY

RELEVANCE AND RELIABILITY MUST BEBALANCED AGAINST ISSUES THATDIFFERENTIATE FROM ONE ANOTHER. IT ISIMPORTANT TO UNDERSTAND, THAT THEISSUES CONCERNING THE QUALITY WILLPROVIDE DIFFERENT LOAD EVEN EXCHANGEDFROM ONE SITUATION TO THE NEXT.

MEASUREMENT APPROACH

TOUSING PRESENT VALUE

CONCEPT OF LIABILITY

MEASUREMENT

ASSET

MEASUREMENT LIABILITY

FAIR VALUE KEWAJIBAN

ASSET VALUE

PRESENT VALUE

to assess the value of current assets recognized for the purpose of guaranteeing that the obligation involving the owner or admitted liability in the entity by an amount comparable

DEBT POSITION OF THE ENTITY

RELEVANT OBLIGATION SIZE

Statements of Financial Accounting Concept framework no.8 for financial reporting (Conceptual framework for financial reporting)SFAC No. 8 is one of a series of publications on the FASB's financial accounting and reporting for the conceptual framework chapter includes two new ones that replaced the SFAC No. 1, objectives of financial reporting by Business Enterprises, and the SFAC No. 2, qualitative characteristics of accounting information. SFAC No.8 is meant to set the goals and fundamental concepts that would become the basis for the development of financial accounting and reporting guidelines

In general the content and purpose of the SFAC no 8 is

1. The first results of the project with the IASB in formulating basic concepts of financial accounting

2. Replace SFAC no 1 & 2

3. Consist 3 chapters1. Chapter 1 financial reporting purposes common purpose

2. Chapter 2 reporting entity

3. Chapter 3 characteristic of qualitative financial information useful

Sfac no.8 in general formulated three the purpose of financial reporting

1. Provides information about financial reporting entity that are useful for investors, lenders and creditor existing and potential in making decisions on resources supply to entity rapporteur

2. To assess the prospects of net cash flow, which is owned by an entity, existing investors and potential investors, lenders and other creditors who need information about the resources of the entity, the entity's claims, and how efficient and effective management of the entity conducting management and Commissioners who have completed their responsibility to use resources of entities

3. 3. common purpose financial report provides information about financial reporting position of an entity, namely information about to economy resources and claims against the economic resources in reporting entity

Primary usersObserved from financial reporting purposes an entity that is

recommended in sfac no.8 it seemed that users of financial information which serves to precedence

1. investors and potential investors

2. the creditors and prospective creditors. Investors and creditors are parties who provide resources for an entity but does not have direct access to the information needed

Information needed

Direction and types of information required by investors and creditors namely

• Investors and creditors requires information that could help they judge net cash flow prospects an entity in the future

• Information about reporting economy resources an entity, changes and a claim for resources

• Changes and claims over resources

Characteristic of qualitative information

The qualitative characteristics of useful financial information consists of, identify the types of information that may be useful to existing creditors and potential investors and other lenders to make decisions about an entity reporting based on information possessed in the form of financial statements

There are constraints related to financial reporting capability to provide useful information, i.e. by taking action against barriers that could differ on kos various types of information. The information will be useful when is relevant and appropriately represented

Fundamental characteristic qualitative

SFAC No. 8 establishes the fundamental qualitative characteristics of element is the exact representation and relevance

relevance

Relevant financial information is capable of making a difference in decision-making by the user. The information is said to be relevant when such information has the quality criteria, among others

• Predictive value, information is said to have value predictif if can be used as an input for a process used by users to predict the outcome of the future.

• Value confirmatory, financial information is said to have value confirmation if it can provide feedback about evaluation formerly or both

Three characteristics in perfect information representation

1. Complete, which includes all the information necessary for the user to understand the phenomenon that is being described as including all the necessary explanation and description

2. Neutral, describing selection or the presentation of financial information without bias in the sense not sloping, weighted, emphasize, wearing a race, or manipulated to increase the probability that financial information will be received good or not by the user information

3. Error free, i.e. There are no errors or omissions in the description of the phenomenon and the process used to generate the information that is reported to have been selected and applied with no errors in the process

Apply a qualitative fundamental characteristics

• Identify an economic phenomenon has the potential to be useful to the users of financial information that reporting entities

• Identify kind of information about the phenomenon to be relevant if available and can any represented

Increase characteristic qualitative

• It can be compared, allowing users to identify and understand the similarities and differences between the items of the financial statement

• Verifiable, means that an observer knowledgeable and independent different bias reach consensus though not necessarily complete agreement that is an faithful depiction of certain

Punctuality mean having information available to make decisions within the time will be able to renew their decisions. The longer information then the information become less useful

Can be understood, namely classify, characterize, and presenting information in a clear manner and concise will make the information could ever be understood

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