1
The FASB conceptual framework is a system of interrelated objectives and fundamentals that serves as a reference point for creating and implementing GAAP, but the framework itself is not GAAP.
2
There are four main components of the framework: 1) Objective of financial reporting, 2) Qualitative characteristics of useful financial information, 3) Elements of financial statements, and 4) Recognition and measurement criteria.
3
The primary objective of financial reporting is to provide financial information to investors and creditors to help them assess the amount, timing, and uncertainty of future cash inflows.
4
Qualitative characteristics of useful financial information include relevance (predictive and confirmatory value), faithful representation (complete, neutral, and free from error), comparability, consistency, verifiability, timeliness, and understandability.
5
The elements of financial statements include assets, liabilities, equity, revenues, expenses, gains, and losses.
6
Recognition criteria determine when an item should be recorded in financial statements (meeting an element definition, probable future economic benefits, and reliable measurement).
7
Measurement bases include historical cost, current cost, realizable value, fair value, and the present value of cash flows.