(a) Understandability
Financial information is intended to assist users in making economic decisions. For this purpose, it is important that financial information is presented in a form which users can understand. However, this does not mean that complex matters which some users may find difficult to understand, and which some directors may like an excuse to exclude, should be left out of financial statements. Reports from which data has been excluded could be incomplete and misleading. The Conceptual Framework states that users can be assumed to have reasonable knowledge of business and economic activities and be prepared to review and analyse the information diligently.

Comparability
In understanding the financial performance of an entity, users will want to compare its results with those of other entities in the same sector and with its own results for previous periods. The concept of comparability is therefore very important. Comparison between entities is made more possible by IFRS Accounting Standards in which there is limited accounting policy choice and by the requirement to disclose accounting policies. So if two entities have applied different accounting policies, users can be aware of that and allow for it.

Comparing an entity’s results with its performance in prior years requires the application of consistency. An entity should treat financial items and transactions in a consistent manner from year to year, by applying the same accounting policies. Where there is a change of accounting policy from one year to the next, the comparative information must be restated to show what the results for the previous year would have been if the new accounting policy had been applied. The statement of changes in equity also shows the effect on the previous year’s equity balances of the change of accounting policy. The user is therefore able to adjust for the change of accounting policy and observe the changes in underlying performances.

(b). The criteria for recognition:
Only items that:

• meet the definition of an asset, a liability, or equity are recognised in the statement of financial position; or
• meet the definition of income or expenses are recognised in the statement(s) of financial performance.

However, not all items that meet the definition of one of those elements are recognised.
An asset or liability is recognised only if recognition of that asset or liability and of any resulting income, expenses, or changes in equity provides users of financial statements with information that is useful, i.e., with:

• relevant information about the asset or liability and about any resulting income, expenses, or changes in equity; and
• a faithful representation of the asset or liability and of any resulting income, expenses, or changes in equity.

Information about an asset or liability may not be relevant when there is uncertainty about its existence or when there is only a low probability of an inflow or outflow of economic benefits in respect of that asset or liability.
Whether a faithful representation can be provided may be affected by the level of measurement uncertainty associated with the asset or liability or by other factors.

(c). Measurement bases of elements of Financial Statement

• Historical cost is whereby assets are recorded at the amount of cash or cash equivalents paid or fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amounts of proceeds received in exchange for the obligation, or in some circumstances at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
• Current cost whereby assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently, and liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.
• Realisable (settlement) value is the amount of cash or equivalents that could currently be obtained by selling an asset in an orderly disposal. Settlement value is the undiscounted amounts of cash and cash equivalents expected to be paid to satisfy the liabilities in the normal course of business.
• Present value is the presented discounted value of the future net cash flows in the normal course of business.