Conceptual Framework

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Conceptual Framework
and
Accounting Theory

Word account: 2138 Table of content
Executive summary………………………………………………………1 1. Introduction……………………………………………………………2 2. Main body……………………………………………………………...3 2.1 The framework of accounting………………………………………………...3 2.1.1 Theoretical level………………………………………………………...4 2.1.2 Fundamental conceptual level…………………………………………..4 2.1.3 Operational levels……………………………………………………….5 2.2 Theory of accounting………………………………………………………….6 2.2.1 Pragmatic accounting……………………………………………………7 2.2.1.1 Descriptive pragmatic approach………………………………..7 2.2.1.2 Psychological pragmatic approach……………………………..7 2.2.2 Normatiive accounting…………………………………………………..8 2.2.3 Positive accounting………………………………………………………8 2.2.4 Critical accounting……………………………………………………….8 2.3 How far an accounting conceptual framework contributes to or constitutes a theory of accounting……………………………………………...9 3 Conclusion………………………………………………………………………….12 Reference……………………………………………………………………………..13

Executive summary
This report mainly focus on the concept of the conceptual framework and the theory of accounting, moreover, the relationship between them.

1. Introduction
In 2004, the Australian Accounting Standard Board (AASB) adopted the Framework for the Preparation and the Presentation of Financial Statement, as issued by the International Accounting Standards Board (IASB) (Ruth, P et al, 2006). In the past, Australian Accounting Standard Board was responsible for the development of a conceptual framework of accounting. It aim to define the nature, subject, purpose and broad content of general purpose financial reporting. Later, in 2002, Financial Reporting Council (FRC) made a decision that Australia would adopt accounting standards issued by the International Accounting Standard Board (IASB) from 2005. Since then, the related requirement required we also adopt the conceptual framework developed by the IASB (Deegan, C.,2010). Moreover, according to Financial Accounting Theory, Scott Graham and Kate said that it is necessary to understand the conceptual framework and accounting theory to develop the new accounting standards and support the accounting practice. Moreover, the recognition of the need for conceptual framework has extended to other accounting sectors, including the International and Australian Accounting Standard Board. Each board use their exsiting conceptual framework to make accounting standards decisions (Scott, H., Graham, P. and Kate, H., 2006). This report collected the different researchers’ views about the new conceptual framework and its relationship with accounting theory. Thus, a clear concept of conceptual framework would be set and how far it contributes to or constitute a theory of accounting. This report is mainly aim to the definition of conceptual framework firstly. Analyzing the theory of accounting is the second step. Finally, it talks about the relationship between the conceptual framework and the accounting theory.

2. Main body
2.1 The framework of accounting
According to AASB (AASB,2011, cite in…,year), as the result of replacement of the relevant existing AASB Standards, the parts of the existing Australian conceptual framework (SAC 3 Qualitative Characteristics of Financial Information and SAC 4 Definition and Recognition of the Elements of Financial Statements) that instead of the Framework for the Preparation and Presentation of Financial Statements issued by the IASB are being replaced by this Framework. Therefore, the SAC 1 Definition of the Reporting Entity and SAC 2 Objective of General Purpose Financial Reporting are preserved in the new framework. The FASB made this concepts earlier than the IASB, but IASB developed gave the concept more briefer. They still have some similarities, such as they both are lack of the treatment of measurement (cite journal). The Australian Financial Accounting...
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