Conceptual Framework for Financial Reporting

Aggregation
Aggregation is the adding together of assets, liabilities, equity, income or
expenses that have shared characteristics and are included in the same
classification.
Aggregation makes information more useful by summarising a large volume
of detail. However, aggregation conceals some of that detail. Hence, a balance
needs to be found so that relevant information is not obscured either by a
large amount of insignificant detail or by excessive aggregation.
Different levels of aggregation may be needed in different parts of the
financial statements. For example, typically, the statement of financial
position and the statement(s) of financial performance provide summarised
information and more detailed information is provided in the notes.
7.19
7.20
7.21
7.22
Conceptual Framework
A88
© IFRS Foundation

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C
ONTENTS
from paragraph
CHAPTER 8—CONCEPTS OF CAPITAL AND CAPITAL
MAINTENANCE
CONCEPTS OF CAPITAL
8.1
CONCEPTS OF CAPITAL MAINTENANCE AND THE DETERMINATION OF
PROFIT
8.3
CAPITAL MAINTENANCE ADJUSTMENTS
8.10
Conceptual Framework
© IFRS Foundation
A89

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The material included in Chapter 8 has been carried forward unchanged from the Conceptual
Framework for Financial Reporting issued in 2010. That material originally appeared in
the Framework for the Preparation and Presentation of Financial Statements issued in
1989.
Concepts of capital
A financial concept of capital is adopted by most entities in preparing their
financial statements. Under a financial concept of capital, such as invested
money or invested purchasing power, capital is synonymous with the net
assets or equity of the entity. Under a physical concept of capital, such as
operating capability, capital is regarded as the productive capacity of the
entity based on, for example, units of output per day.
The selection of the appropriate concept of capital by an entity should be
based on the needs of the users of its financial statements. Thus, a financial
concept of capital should be adopted if the users of financial statements are
primarily concerned with the maintenance of nominal invested capital or the
purchasing power of invested capital. If, however, the main concern of users is
with the operating capability of the entity, a physical concept of capital should
be used. The concept chosen indicates the goal to be attained in determining
profit, even though there may be some measurement difficulties in making
the concept operational.