A Converged Conceptual Framework
In October 2004, the FASB and IASB added to their agendas a joint project to develop an improved, common conceptual framework that builds on their existing frameworks (that is, the IASB’s Framework for the Preparation and Presentation of Financial Statements and the FASB’s Statements of Financial Accounting Concepts). Rationale for the Project and Project Objective
A conceptual framework is basically a foundation serving as a guide to standard setters to help them establish the principles and concepts. Therefore, the conceptual framework project is to develop an improved common conceptual framework that provides a foundation for developing future accounting standards. In this sense, the framework is essential to “fulfilling the Boards’ goal of developing standards that are principles-based, internally consistent, and internationally converged and that lead to financial reporting that provides the information capital providers need to make decisions in their capacity as capital providers”. (FASB) Simply put, the Conceptual Framework project aims to “update and refine the existing concepts to reflect the changes in markets, business practices and the economic environment that have occurred in the two or more decades since the concepts were first developed.” (IFRS) Therefore, the IASB and the US FASB (the boards) are undertaking the project jointly. Scope of the project
As we expected, the new framework will deal with a wide range of topics and issues. Moreover, it will build on the existing IASB and FASB frameworks-- the IASB’s Framework for the Preparation and Presentation of Financial Statements and the FASB’s Statements of Financial Accounting Concepts-- and consider developments subsequent to the issuance of those frameworks. In order to efficiently and effectively improve, complete, and converge the existing frameworks, the project will focus on changes in the environment since the two original frameworks were issued, as...
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