the role of conceptual framework

Accounting Conceptual Framework is a set of theoretical principles which are generally accepted as guidelines in preparing financial statements. One of the purposes of having an accounting conceptual framework is to give guidelines for the standard setters when they are coming up with new standards or revising existing accounting standards. Besides, it is also very useful when preparing and auditing the financial statements. This framework is being used by many different types of users include Board of IASB (International Accounting Standard Board) for the development of future international accounting standards as well as promoting harmonization of accounting standards throughout the countries. Besides, it is also very useful for the national standard setting bodies to aid the development of national standards. Moreover, this framework states that the investors are the main users of the financial statements in making economic decision and the financial statements need to predict an entity's future cash flows. Besides, this accounting conceptual framework is used to ensure that the financial statements prepared are understandable, relevant, reliable and comparable. Other that that, it also acts as a frame of reference to solve accounting problems that had not appeared in the current legislation or accounting standards. Not only that, the framework is used to help the IASB by providing a basis for reducing the number of alternative accounting treatments permitted by IFRS. Another purpose of the framework is to provide information to other parties that are interested in the work of the IASB.
The IASB framework highlights the importance of four qualitative characteristics needed to produce useful financial statements to the users. The four qualitative characteristics are understandability, relevance, reliability and comparability. Understandability means that the user possessing simple business, economic and accounting knowledge will be able to understand the