Accounting Theory Essay

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ACC307 – Accounting Theory Assignment Name: Chun Ho Hui Student ID: na20150418 Case Study 1 Questions 1. Explain why principles-based standards require a conceptual framework. A: Conceptual framework can be defined as “an attempt to define the nature and purpose of accounting” (Team, 2015). Conceptual framework is essential for principle-based standards because it lays out a fundamental structure for principles-based standards. Setting the standard on and relate to an established body of concepts and objectives, enable FASB and IASB to “issue more useful and consistent standards over time” (Essays, 2013). For any future developments or armaments on the standards, the framework will ensure the changes will be within its…show more content…
Brue Pounder has mentioned the goal of this is to achieve “absence of differences in accounting standards among countries.” (Pounder, 2007). As previously mentioned, a principle-based accounting standard approach has to be developed from its conceptual framework, therefore a common framework has to be converged or shared before converging its standards. The importance of the common conceptual framework can also be referenced by its aim: “to develop an improved, common conceptual framework that builds on their existing frameworks.” (FASB, 2014) Sharing a common conceptual framework will be the first step of converging the accounting standard of FASB with IASB. Only by doing so, FASB is able to fulfill 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 investors need to make sound and effective decisions.” (Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, 2014). 3. It is suggested that several parties can benefit from a conceptual framework. Do you consider that a conceptual framework is more important for some parties than others? Explain your reasoning. A: I would agree in some extends a conceptual framework is more essential to some parties than others. The conceptual framework is particularly important to IASB itself. The very major purpose of developing the
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