By Jim McFie, a Fellow of the Institute of Certified Public Accountants of Kenya
FASB (the Financial Accounting Standards Board, a US body) was the first organization to develop “Concepts Statements”. All the other “Concepts Statements” have been based on those developed by FASB. A new “Conceptual Framework for Financial Reporting” was worked on jointly by FASB and IASB (the International Accounting Standards Board) and was published simultaneously by FASB and IASB in September 2010. It deals with “The Objective of General Purpose Financial Reporting” and the “Qualitative Characteristics of Useful Financial Information”. The contents would be excessively long to read at a single sitting: this article restricts itself to ““The Objective of General Purpose Financial Reporting” as agreed upon by FASB and IASB. The IPSASB (the International Public Sector Accounting Standards Board, a committee of the International Federation of Accountants – IFAC,based in New York) Framework is quite different: below, I point out the objectives of reports for private and public sector entities. The rest of the IPSASB Framework will be dealt with in a separate article.
FASB and IASB state that the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments and providing or settling loans and other forms of credit.
IPSASB states that the objectives of financial reporting by public sector entities are to provide information about the entity that is useful to users of general purpose financial reports (GPFRs) for accountability purposes and for decision-making purposes. GPFRs of public sector entities are developed primarily to respond to