a. Qualitative Characteristics of Financial Information

The IASB Conceptual Framework for Financial Reporting outlines the qualitative characteristics that make financial information useful. These characteristics are divided into fundamental and enhancing qualities.

Fundamental Qualitative Characteristics:

1. Relevance: Information is relevant if it can influence users’ economic decisions by helping them evaluate past, present, or future events or confirming previous evaluations. For example, predictive value and confirmatory value are two components of relevance.
2. Faithful Representation: Financial information must faithfully represent the economic phenomena it purports to represent. This means it should be complete, neutral, and free from error.

Enhancing Qualitative Characteristics:

1. Comparability: Users must be able to compare financial information across different entities or across periods to identify trends and differences. Consistency in applying accounting methods over time enhances comparability.
2. Verifiability: Verifiability helps assure users that the information faithfully represents the economic phenomena. It ensures that different knowledgeable and independent observers could reach consensus that the depiction is accurate.
3. Timeliness: Information is timely if it is available to decision-makers in time to influence their decisions. A delay in reporting reduces the relevance of financial information.
4. Understandability: Financial information should be presented in a clear and concise manner so that users with reasonable financial knowledge can interpret and comprehend it.

b. Objectives of the Financial Reporting Council of Nigeria (FRCN)

The FRCN was established with the following objectives:

1. To develop and publish accounting and financial reporting standards for public interest entities.
2. To enforce compliance with accounting, auditing, corporate governance, and financial reporting standards.
3. To promote the highest standards in corporate governance and accounting practices in Nigeria.
4. To ensure accuracy and reliability in financial reporting by monitoring and enforcing accounting standards and practices.

c. Concepts of Capital Maintenance

The IASB’s Conceptual Framework identifies two types of capital maintenance:

1. Financial Capital Maintenance: This concept holds that a company’s profit is earned only if its net assets at the end of a period exceed those at the beginning, after excluding any distributions to, or contributions from, owners during the period. In other words, profit is recognized only if the financial capital invested in the business is maintained.
2. Physical Capital Maintenance: Under this concept, profit is recognized only if the physical productive capacity (or operating capability) of the entity at the end of the period exceeds the physical capacity at the beginning, excluding owner-related transactions. This approach is commonly used in industries where maintaining productive capacity is critical.