Contents

Contents ...................................................................................................................................... 1

I. Preliminary .......................................................................................................................... 2

1.1 Purpose and Status ....................................................................................................... 2

1.2 Scope ............................................................................................................................ 2

1.3 Users and Their Information Needs ............................................................................. 2

1.4 The Objective of Financial Statement ......................................................................... 3

1.5 Underlying Assumption .................................................................................................... 3

II. Theoritical Background ................................................................................................... 4

2.1 Qualitative Characteristics of Financial Statements ......................................................... 4

2.1.1 Understandability ....................................................................................................... 4

2.1.2 Relevance ................................................................................................................... 4

2.1.3 Materiality .................................................................................................................. 5

2.1.4 Faithful Representation .............................................................................................. 5

2.1.5 Substance Over Form ................................................................................................. 5

2.1.6 Neutrality.................................................................................................................... 5

2.1.7 Prudence ..................................................................................................................... 5

2.1.8 Completeness ............................................................................................................. 5

2.1.9 Comparability ............................................................................................................. 5

2.2 The Elements of Financial Statements......................................................................... 6

2.2.1 Financial Position ................................................................................................. 6

2.2.2 Financial Performance .......................................................................................... 6

2.3 Measurement of the Elements of Financial Statements ............................................... 7

2.4 Concept of Capital Maintenance and the Determination of Profit .............................. 7

III. Example of Application of Conceptual Framework ........................................................ 8

IV. Conclusion ..................................................................................................................... 12

Bibliography ............................................................................................................................. 13
 I. Preliminary

1.1 Purpose and Status

PSAK 14

A primary issue in accounting for inventories is the amount of cost recognized as an

asset and subsequent accounting treatment on asset until the related revenues are recognized.
Statement This provides guidance on the cost menentuan and subsequent recognition as an
expense, including any a decrease to net realizable value. This statement also provides
guidance on the cost formulas that are used to assign costs to inventories.

PSAK 15

1.2 Scope
These statement will be applied to all inventories,except :

 (SEE PSAK 34 : Construction contract) : In this statement process will

applied in contract,including service contruction.
 (SEE IN PSAK 50 : Financial instrument : the presentation PSAK 55 :
financial instrument recognition and measurement)
 Empty

These statement doesn’t applied for inventories measurement for :

 A manufacturer of agricultural products after harvest,and minerals and

mineral products,as long as the inventory is meas

1.3 Users and Their Information Needs

No. Users Information Needs
1 Investors Help to determine whether they should invest and the firm’s
ability to pay dividends
2 Employees Provide informtion about the stability profitability, retirement
benefits, and employement opportunities
3 Lenders Help to determine the firm’s ability to pay the loan
4 Suppliers Help to determine the firm’s ability to pay the obligation
and
Creditors
5 Customers Provide information about the continuance of an enterprise
 6 Governments Provide information about the resources and activities of
and enterprise to determine the amount for national income
Agencies
7 Public Provide information about the trends and recent developments
in the prosperity of the enterprise and the range of its activities

The management of an enterprise has primary responsibility for the preparation

and presentation of financial statements of the enterprise. Management has the ability
to determine the form and content of such additional information in order to meet its
own needs.

1.4 The Objective of Financial Statement

The financial statement shows information about financial position,
performance, and changes in financial position of an enterprise that is useful to a wide
range users in making economic decisions. It is also shows the result of the
stewardship of management, or the accountability of management for the resources
entrusted to it.

The financial position is affected by economic resources its controls, its

financial structure, its liquidity and solvency, and its capacity to adapt to changes in
the environment in which it operates. The component parts of the financial statements
interrelate because they reflect different aspects of the same name transaction or other
events. The financial statement also contain notes and supplementary schedules and
other information.

1.5 Underlying Assumption

Financial statements are prepared on the accrual basis of accounting. It means
the transactions and other events are recognised when they occur and they are
recorded in the accounting records and reported in the financial statements of the
periods to which they relate.

The financial statement also prepared on assumption that an enterprise is going

concern, will continue in operation for the foreseeable future, and has neither intention
nor the need to liquidate.
 II. Theoritical Background

2.1 Qualitative Characteristics of Financial Statements

2.1.1 Understandability
The information provided should be understandable by users. The users are
assumed to have reasonable knowledge of business and economic activities and
accounting and a willingness to study the information with reasonable diligence. The
complex matters also should be included in the financial statement.

2.1.2 Relevance
The information must be relevant to the decision-making needs of users. The
predictive and confirmatory roles of information are interrelated. As prediction of
 future financial position and performance, the information need not be in the form of
an explicit forecast.

2.1.3 Materiality
Information is material if its omission or misstatement could influence the
economic decisions of users taken on the basis of the financial statements. Materiality
depends on the error judged in particular circumstances of its omission or
misstatement.

2.1.4 Faithful Representation

The information should be represented faithfully the transactions and other
events it either purports to represent or could reasonably be expected to represent, in
order to be reliable.

2.1.5 Substance Over Form

The information which is represent faithfully the transactions and other events
that it purports to represents, it is necessary that they are accounted for and presented
in accordance with their substance and economic reality and nbot merely their legal
form.

2.1.6 Neutrality
To be reliable, the information contained in financial statements must be
neutral, that is, free from bias and influence the decision in order to achieve a
predetermined result or outcome.

2.1.7 Prudence
Prudence is the inclusion of a degree of caution in the exercise of the
judgements or income are not overstated and liabilities or expenses are not
understated. However, the exercise of prudence does not allow to create an excessive
provisions, the deliberate understatement of assets, the deliberate overstatement
liabilities or expense, because it makes the financial not neutral.

2.1.8 Completeness
To be reliable, the information in financial statements must be completed
within the bounds of materiality and cost.

2.1.9 Comparability
Users must be able to compare the financial statements of enterprise both
through time in order to identify trends in its financial position and performance and to
 different enterprises to evaluate their relative financial position, performance, and
changes in financial position. The need for comparability should not be confused with
mere uniformity and should not be allowed to become an impediment to the
introduction of improved accounting standards. Hence, enterprises have to show a
financial statements with a corresponding information for the preceding periods.

2.2 The Elements of Financial Statements

2.2.1 Financial Position
The financial position consists of 3 elements, which are:

a. Assets
Asset is resource controlled by enterprise as a result of past events and
from which future economic benefits are expected to flow to the enterprise.
The future economic benefit can be in the form of exchanged for the other
asset, used to produce good or services to be sold, used to settle a liability, and
distributed to the owners of the enterprise.
b. Liability
Liability is present obligation of the enterprise arising from past events.
A distiction needs to be drawn between a present obligation and a future
commitment. Present obligation can be settled by payment of cash, transfer of
other assets, provision of services, replacement with aother obligation, and
conversion of the obligation to equity.
c. Equity
Equity is residual interest in the assets of the enterprise after deducting
all its liabilities.

2.2.2 Financial Performance

a. Income
Income is increases in econmic 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 relating to contributions from equity
participants.
b. Expense
Expenses are decreases in economic benefits during the accounting
period in the form of outflows or depledtions of assets or incurrences of
liabilities that result in decreases in equity, other than those relating to equity
participant.
2.3 Measurement of the Elements of Financial Statements
Different measurement bases are used to different degrees and in vary in
financial statement, including:
a. Historical Cost
Assets are recorded at the amount of cash paid to acquire them. Liabilities are
recorded at the amount of proceeds received in exchange for the obligation..
b. Current Cost
Assets are carried at the amount of cash that would have to be paid currently.
Liabilities are carried at the amount of cash that would be required to settle the
obligation currently.
c. Realizable Value
Assets are carried at the amount of cash that could currently be obtained by
selling the asset in an orderly disposal. Liabilities are carried at their settlement
values.
d. Present Value
Assets are carried at the present discounted value of the future net cash inflows
that are expected to generate normal course of business. Liabilities are carried at
the present discounted value of future net cash outflows that are expected to settle
the liabilities of normal course of business.

2.4 Concept of Capital Maintenance and the Determination of Profit

There are 2 concepts of capital maintenance, which are:
a. Financial Capital Maintenance
When capital is defined in terms of nominal monetary units, profit represents
the increase in nominal money capital over the period. When capital is defined in
terms of constant purchasing power units, profit represents the increase in invested
purchasing power over period.
b. Physical Capital Maintenance
When capital is defined in terms of the physical productive capacity, profit
represebts the incrrease in that capital over the period.
 III. Example of Application of Conceptual Framework

1. Which ONE of the following statements best describes the term 'liability'?
A. An excess of equity over current assets
B. Resources to meet financial commitments as they fall due
C. The residual interest in the assets of the entity after deducting all its liabilities
D. A present obligation of the entity arising from past events
Short Analysis
Based on Framework for The Preparation of Financial Statements number 60
which stated “an essential characteristic of a liability is that the enterprise has a
present obligation.” It is also clarified by number 63 which stated “liabilities result
from past transaction or other past event.”

2. Are the following statements regarding the term 'profit' true or false?
 (1) Profit is any amount over and above that required to maintain the capital at the
beginning of the period.
(2) Profit is the residual amount that remains after expenses have been deducted from
income.
Statement (1) Statement (2)
A. False False
B. False True
C. True False
D. True True
Short Analysis
For both statement, it is based on Framework for The Preparation of Financial
Statements number 105 which stated “inflows of assets in excess of amounts needed
to maintain capital may be regarded as profit and therefore as a return on capital.
Hence, profit is the residual amount the remains after expenses (including capital
maintenance adjustment, where appropriate) have been deducted from income.”

3. Which ONE of the following statements best describes the term 'financial position'?
A. The net income and expenses of an entity
B. The net of financial assets less liabilities of an entity
C. The potential to contribute to the flow of cash and cash equivalents to the entity
D. The assets, liabilities and equity of an entity
Short Analysis
Based on Framework for The Preparation of Financial Statements number 49
which stated “the elements directly related to the measurement of financial position
are asset, liabilities, and equity.” It is also clarified by number 16 which stated
“financial position is affected by the economic resources its controls, its financial
structure, its liquidity and solvency, and its capacity to adapt to changes in the
environment in which it operates.”

4. Which ONE of the following statements best describes the term 'going concern'?
A. When current liabilities of an entity exceed current assets
B. The ability of the entity to continue in operation for the foreseeable future
C. The potential to contribute to the flow of cash and cash equivalents to the entity
D. The expenses of an entity exceed its income
Short Analysis
 Based on Framework for The Preparation of Financial Statements number 23
which stated “it is assumed that the enterprise has neither the intention nor the need to
liquidate or curtail materially the scale of its operations.”

5. Which ONE of the following terms best describes the relationship of the assets,
liabilities and equity of an entity?
A. Financial performance
B. Financial position
C. Future economic benefit
D. Obligation
Short Analysis
Based on Framework for The Preparation of Financial Statements number 49
which stated “the elements directly related to the measurement of financial position
are asset, liabilities, and equity.” It is also clarified by number 16 which stated
“financial position is affected by the economic resources its controls, its financial
structure, its liquidity and solvency, and its capacity to adapt to changes in the
environment in which it operates.”

6. Which ONE of the following terms best describes assets recorded at the amount that
represents the immediate purchase cost of an equivalent asset?
A. Historical cost
B. Realizable value
C. Present value
D. Current cost
Short Analysis
Based on Framework for The Preparation of Financial Statements number 100
(b) which stated “assets are carried at the amount of cash or cash equivalents that
would have to be paid if the same or equivalent asset was acquired currently.”

7. Which ONE of the following is true of the qualitative characteristic of

'Understandability' in relation to information in financial statements?
A. Users should be willing to study the information with reasonable diligence
B. Users are expected to have significant business knowledge
 C. Financial statements should exclude complex matters
D. Financial statements should be fee from material error
Short Analysis
Based on Framework for The Preparation of Financial Statements number 25
which stated “users are assumed to have reasonable knowledge of business and
economic activities and accounting and a willingness to study the information with
reasonable diligence.”

8. Which ONE of the following terms best describes information in financial statements
that is neutral?
A. Understandable
B. Reliable
C. Relevant
D. Unbiased
Short Analysis
Based on Framework for The Preparation of Financial Statements number 36
which stated “to be reliable, the information contained in the financial statements must
be neutral, that is free from bias.”

9. Which ONE of the following terms best describes the amount of cash or cash
equivalents that could currently be obtained by selling an asset in an orderly disposal?
A. Fair value
B. Realisable value
C. Residual value
D. Value in use
Short Analysis
Based on Framework for The Preparation of Financial Statements number 100
(c) which stated “assets are carried at the amount of cash or cash equivalents that
could currently be obtained by selling an asset in an orderly disposal.”

10. Which ONE of the following terms best describes financial statements whose basis of
accounting recognises transactions and other events when they occur?
A. Accrual basis of accounting
B. Going concern basis of accounting
 C. Cash basis of accounting
D. Invoice basis of accounting
Short Analysis
Based on Framework for The Preparation of Financial Statements number 22
which stated “the effect of transactions and other events are recognised when they
occur (and not as cash or its equivalent is received or paid) and they are recorded in
the accounting records and reported in the financial statements of the periods to which
they relate.”

IV. Conclusion

The framework describes the basic concept that underlie financial statements
prepared. It provides information about financial position, performance, and changes
in financial position of an entity that is useful and to show the results of management’s
stewardship. It sepecifies the qualities that make financial information useful;
understandability, relevance, materiality, faithful representation, substance over form,
prudence, neutrality, completeness, and comparability. The elements of financial
statement are assets, liabilities, equity, income, and expenses. Those elements can be
measured at their historical cost, current cost, realisable value, and present value.
Profits and losses can be measured in terms of financial capital maintenance and
physical capital maintenance.
 Bibliography

Ikatan Akuntan Indonesia. (2015). Standar Akuntansi Keuangan Per Efektif 1 Januari 2015.
Jakarta.