Concepts

Topics: International Financial Reporting Standards, Financial statements, International Accounting Standards Board Pages: 3 (1404 words) Published: November 1, 2014

‘What is a conceptual framework in accounting?’ Is it helpful or unhelpful to accountants/accounting? Discuss. As there has been a continuous debate about different theories of financial accounting which should be undertaken in the presence of inflation such as current purchasing power accounting, current cost accounting and continuously contemporary accounting which was not supported by the accounting professions, IASB has undertaken the work to develop conceptual frameworks for accounting. The FASB in the US which developed one of the first conceptual frameworks in accounting defined its conceptual framework as ‘a coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards’. (Statement of Financial Accounting Concepts No 1: Objectives of Financial Reporting by Business Enterprises, 1978) According to FASB, the conceptual framework ‘prescribes the nature, function and limits of financial accounting and reporting.’ According to the Exposure Draft (p12) publishes in 2008, the conceptual framework is: ‘a coherent system of concepts that flow from an objective. The objective of financial reporting is the foundation of the framework. The other concepts provide guidance on identifying the boundaries of financial reporting; selecting the transaction, other events and circumstances to be represented; how they should be recognised and measured (or disclosed); and how they should be summarised and communicated in financial reports.’ When developing the conceptual frameworks, there is a need to develop some consensus on important issues such as what is meant by financial reporting and what should be its scope; what organisational characteristics or attributes indicate that an entity should produce general purpose financial reports; what the objective of financial reporting is; what qualitative characteristics financial information should possess; what the elements of financial reporting are; what measurement rules should...
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