Performance
Profit is frequently used as a measure of performance or as the basis for other measures, such as return on investment or earnings per share. The elements directly related to the measurement of profit are income and expenses. The recognition and measurement of income and expenses, and hence profit, depends in part on the concepts of capital and capital maintenance used by the enterprise in preparing its financial statements. These concepts are discussed in paragraphs 101 to 109.
Income is increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
The definitions of income and expenses identify their essential features but do not attempt to specify the criteria that need to be met before they are recognised in the statement of profit and loss. Criteria for recognition of income and expenses are discussed in paragraphs 81 to 97. Items of income and expenditure can be presented in the statement of profit and loss in different ways so as to provide relevant information for decision making. However, it is generally accepted practice to disclose incomes and expenditure from ordinary activities separate from those from other activities.
Beside, these this Framework also lists, criteria to recognise any items in financial statements in general and other relevant characteristics needed in preparation and presentation of financial statements. There are also definitions of cost methods used in recognising the items such as historical cost, market cost, etc. as well definitions of capital maintenance concept dealing with proper recognition of income and expenditure, and equity elements.