南京大学 MPAcc、MAud(双证在职)
2015 级双证在职 MPAcc/MAud
南京大学 MPAcc 教育中心
Comment letter to IASB on conceptual framework
Dear sir :
I am writing this letter to convey some of my opinions on Chapter 2
-qualitative characteristics of useful financial information and Chapter 3 –
financial statement and the reporting entity. After I have read the
exposure draft, I would like to say something to three proposed changes.
First of all, for question No.2 in Chapter2, I consent to the idea that
prudence is important in achieving neutrality. From 2.12 to 2.13 in the
exposure draft, we can see that when we are under uncertainty, we
should still stick to the principle of prudence, otherwise, the estimate will
be less relevant and there will be a trade-off between the level of
measurement uncertainty and other factors that make information
relevant. Prudential defined as cautious behavior to make professional
judgment at the time of uncertainty for the body. According to 2.18 in
Chapter 2,neutrality is supported by the exercise of prudence. Only stick
to the prudence principle, can we avoid overstating assets and income
and understating expenses in future periods. Such as we should accrual
asset reducing value preparation, affirm anticipation liabilities and so on .
Secondly, for question No.3 in Chapter2,from my perspective, I
totally agree with the idea that we should state explicitly that a faithful
represents the substance of an economic phenomenon instead of merely
representing its legal form. That is called faithful representation in the
quality of accounting information. In practice, the external form of the
transaction or event does not always fully reflect its true substance. Focus
on the economic substance of accounting, we can better ensure the
reliability of accounting information.Let us take the financial leasing
rented fixed assets as an example. Although in terms of businesses, the
corporate does not have the legal form of ownership, but as the lease
contract is for so long, just close to the useful life of the asset, and at the
end of the lease term, the lessee have the priority to purchase it . So, in
essence, the corporate is in control of the use rights and the beneficiary
of the asset. So in the accounting, the financial leasing of fixed assets we
looked as the assets of the corporate. There are many other
circumstances, such as leaseback, repurchase after sale and confirming
affiliated, all belonged to typical applications of substance over
form.According to 2.18 in Chapter 2, we should also focus on the
prudence . In addition, I believe the faithful representation should not be
overemphasized. In general accounting principles, the dominant
principles are the objectivity, relevance, comparability, consistency, and
timeliness, the faithful representation and prudence are complementary
to the main principles.
Last but not least, I do agree with the opinion about the proposed
description of a reporting entity in paragraphs 3.11 and 3.12.In reality, a
reporting entity is not necessarily a legal entity, but a legal entity must be
a reporting entity. This is because the law requires the legal body must be
independent and legally qualified, while reporting entity is not required.
For example, a company is not only a legally independent body, but it also
is a reporting entity. A unit but the company's sales department, for
example, it is not a law on the subject, but monthly to conduct sales, it is
a reporting entity. And of course, a reporting entity can comprise a
portion of an entity,or two or more entities.A financial reporting entity
should include corporate activities and present potential investors,
creditors and other investors interest or related. It is an entity to prepare
general purpose financial statements.
I really hope you will find my recommendations useful. If there is
anything written in the wrong place, please point it out and give
directions to me .Thank you for your guidance.
Yours sincerely
Zhao Hongle 2015.11.22