Iasb's Conceptual Framework

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A Report on the Significance of the IASB’s Conceptual Framework and the Exposure Draft ‘Conceptual Framework for Financial Reporting – The Reporting Entity’

Introduction

This report is intended to discuss the significance of the IASB’s Conceptual Framework. It will layout the basis of the Conceptual Framework and then discuss its significance and relevance with regards to previous and future accounting industry standards.

Findings

The IASB’s (International Accounting Standards Board) Conceptual Framework is a set of rules and standards that the accountancy industry, within the Global market, adheres to in order to produce clarity across the board when producing financial statements and information for users of those statements.
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It will also give shareholders the ability to rely upon globally standardised audits to ensure that the management of the company is dealing with the activities of the company to the best of their abilities and not misleading the shareholders in any way.

The significance of this is that all companies listed on stock exchanges will now be working towards identical standards in that their treatment of certain items within the financial statements will be all the same, which in itself leads to greater clarity, understanding and the avoidance of ‘creative accounting’.

For example, there are now certain basic assumptions within the financial statements. For example, statements will be detailed in the same manner, and that all statements will take into account the various accounting assumptions of going concern, prudence, matching concept, etc. Previously under the FASB there was no hard and fast rules as to how statements should be laid out or indeed which assumptions had been used. These were all generally ‘notes to the accounts’ which could, invariable, run into hundreds of pages and make the understanding of such for non financial individuals or companies, very difficult and unclear.

The significance of the framework has meant that each individual country no longer has control of its own accounting standards. Accounting bodies in all countries have had to make significant changes to their own working
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