{"id":3617,"date":"2019-10-08T13:33:00","date_gmt":"2019-10-08T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=3617"},"modified":"2025-05-23T12:47:49","modified_gmt":"2025-05-23T12:47:49","slug":"key-concepts-financial-reporting-standards","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/key-concepts-financial-reporting-standards\/","title":{"rendered":"Key Concepts of Financial Reporting Standards"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Financial Reporting Standards (2021 Level I CFA\u00ae Exam \u2013 Reading 22)\",\n  \"description\": \"This CFA Level I Financial Reporting video covers the foundational concepts of financial reporting standards. It explains the objective of financial statements, roles of standard-setting bodies, IFRS vs. US GAAP, qualitative characteristics, required disclosures, and barriers to global convergence. A crucial session for understanding how financial data informs analysis and valuation.\",\n  \"uploadDate\": \"2018-11-23T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/HEL3pNskRoQ\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=HEL3pNskRoQ\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/HEL3pNskRoQ\",\n  \"duration\": \"PT31M49S\"\n}\n<\/script>\n\n\n\n<p>[vsw id=&#8221;HEL3pNskRoQ&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;]<\/p>\n<p>A joint IASB-FASB project was begun in October 2004 with the objective of developing a common conceptual framework for financial reporting.<\/p>\n<p>The differences between IFRS and US GAAP which affect the conceptual framework &nbsp;and the general financial reporting requirements have been reduced by the IASB and FASB agreement on (i) the purpose and scope of the <em>Conceptual Framework (2010)<\/em>, (ii) the objective of general purpose financial reporting, and (iii) the qualitative characteristics of useful financial information.<\/p>\n<p>Today, there are several differences remaining between IFRS and US GAAP. Users of financial statements must, therefore, be prepared to consider how these different reporting standards could potentially impact financial reports, and influence the comparability of financial performance between companies as well as their relative security valuations.<\/p>\n<h2><strong>Comparison of IFRS and US GAAP Frameworks<\/strong><\/h2>\n<p>The differences between IFRS and US GAAP in relation to the financial statement elements (definition, recognition, and measurement) include the following:<\/p>\n<ul>\n<li><strong>Performance Elements<\/strong>: The IASB framework recognizes two elements in relation to financial performance: revenue and expenses. In addition to revenue and expenses, however, the FASB framework includes three other elements: gains, losses, and comprehensive income.<\/li>\n<\/ul>\n<ul>\n<li><strong>Financial Position Elements<\/strong>: Whereas the IASB framework defines an asset as a resource from which future economic benefits are expected to flow, the FASB framework defines an asset as a future economic benefit. The term \u201cprobable\u201d is also used to define the assets and liabilities elements under the FASB framework, even though the term has a different meaning under the IASB framework.<\/li>\n<\/ul>\n<ul>\n<li><strong>Recognition of Elements<\/strong>: The IASB framework includes the term \u201cprobable\u201d as part of its recognition criteria by requiring that it be probable that any future economic benefit will flow to\/from a reporting entity. The FASB framework, on the other hand, does not include the term \u201cprobable\u201d in its recognition criteria.<\/li>\n<\/ul>\n<ul>\n<li><strong>Measurement of Elements<\/strong>: Measurement attributes such as historical cost, current cost, settlement value, current market value, and present value, are broadly consistent&nbsp;under&nbsp;the IASB and FASB frameworks. Both frameworks, however, lack fully developed measurement concepts.<\/li>\n<\/ul>\n<blockquote>\n<h2><strong>Question<\/strong><\/h2>\n<p>Which of the following statements is correct?<\/p>\n<p>A. The IASB framework defines an asset as a future economic benefit.<\/p>\n<p>B. The IASB framework defines an asset as a resource from which future economic benefits are expected to flow.<\/p>\n<p>C. The term \u201cprobable\u201d is part of the FASB framework recognition criteria.<\/p>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is B.<\/p>\n<p>The IASB framework defines an asset as a resource from which future economic benefits are expected to flow. Option A is incorrect because it is the FASB framework and not the IASB framework which defines an asset as a future economic benefit. Option C is incorrect too because \u201cprobable\u201d forms part of the IASB framework recognition criteria and not that of the FASB framework.<\/p><\/blockquote>\n<p>&nbsp;<\/p>\n<p><em>Reading 22 LOS 22f:<\/em><\/p>\n<p><em>Compare key concepts of financial reporting standards under IFRS and US generally accepted accounting principles (US GAAP) reporting systems<\/em><\/p>\n<div class=\"notes_inv\">\n<hr>\n<p><em><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/financial-reporting-and-analysis\/learning-sessions-curriculum-financial-reporting-and-analysis\/\">Financial Reporting and Analysis &#8211; Learning Sessions<\/a><\/em><\/p>\n<\/div>\n<p>&nbsp;<\/p>","protected":false},"excerpt":{"rendered":"<p>[vsw id=&#8221;HEL3pNskRoQ&#8221; source=&#8221;youtube&#8221; width=&#8221;611&#8243; height=&#8221;344&#8243; autoplay=&#8221;no&#8221;] A joint IASB-FASB project was begun in October 2004 with the objective of developing a common conceptual framework for financial reporting. The differences between IFRS and US GAAP which affect the conceptual framework &nbsp;and&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-3617","post","type-post","status-publish","format-standard","hentry","category-financial-reporting-and-analysis","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Key Concepts in Financial Reporting Standards | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Explore essential financial reporting standards, including IASB-FASB efforts to develop a common framework for global accounting practices.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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