Conceptional Framework

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Statement of Financial Accounting Concepts No. 8 September 2010

Conceptual Framework for Financial Reporting Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative Characteristics of Useful Financial Information

a replacement of FASB Concepts Statements No. 1 and No. 2

Copyright © 2010 by Financial Accounting Foundation. All rights reserved. Content copyrighted by Financial Accounting Foundation may not be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Financial Accounting Foundation.

Statement of Financial Accounting Concepts No. 8 September 2010

Conceptual Framework for Financial Reporting Chapter 1, The Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative Characteristics of Useful Financial Information

a replacement of FASB Concepts Statements No. 1 and No. 2

Financial Accounting Standards Board
of the Financial Accounting Foundation
401 MERRITT 7, PO BOX 5116, NORWALK, CONNECTICUT 06856-5116

Statements of Financial Accounting Concepts
This Statement of Financial Accounting Concepts (Concepts Statement) is one of a series of publications in the Board’s Conceptual Framework for financial accounting and reporting. Since the publication of the last Concepts Statement, the Board has undertaken a project with the International Accounting Standards Board (IASB) to improve and converge their frameworks. This Concepts Statement, which includes two chapters of that new conceptual framework, supersedes FASB Concepts Statements No. 1, Objectives of Financial Reporting by Business Enterprises, and No. 2, Qualitative Characteristics of Accounting Information. As the Board and the IASB complete additional phases of their joint project, new chapters will be added to this Concepts Statement, and other Concepts Statements will be superseded. Concepts Statements are intended to set forth objectives and fundamental concepts that will be the basis for development of financial accounting and reporting guidance. The objectives identify the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting—concepts that guide the selection of transactions and other events and conditions to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties. Concepts of that type are fundamental in the sense that other concepts flow from them and repeated reference to them will be necessary in establishing, interpreting, and applying accounting and reporting guidance. The Conceptual Framework is a coherent system of interrelated objectives and fundamental concepts that prescribes the nature, function, and limits of financial accounting and reporting and that is expected to lead to consistent guidance. It is intended to serve the public interest by providing structure and direction to financial accounting and reporting to facilitate the provision of unbiased financial and related information. That information helps capital and other markets to function efficiently in allocating scarce resources in the economy and society. Establishment of objectives and identification of fundamental concepts will not directly solve financial accounting and reporting problems. Rather, objectives give direction, and concepts are tools for solving problems. The Board itself is likely to be the most direct beneficiary of the guidance provided by Concepts Statements. They will guide the Board in developing accounting and reporting guidance by providing the Board with a common foundation and basic reasoning on which to consider merits of alternatives. However, knowledge of the objectives and concepts the Board will use in developing new guidance also should enable those who are affected by or interested in generally accepted...
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