Regulatory and Conceptual Framework

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Regulatory and Conceptual Framework
I am going to analyse and evaluate the conceptual and regulatory framework of financial reporting. In order to do this I will look at the objective of financial statements, identify the users of financial statements, explain the conceptual framework for financial reporting, look at the regulatory framework for financial accounting and finally look at the three ways of achieving accounting comparability.
According to IAS Plus website, 2011, the objective of financial statements is;
‘to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions’
This objective is what all entities are aiming to
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The qualitative characteristics are;
‘the attributes that make information provided in financial statements useful to others’ (Kaplan, p.142, 2011)
According to the conceptual framework there are four qualitative characteristics. These four characteristics are; * Understandability * Relevance * Reliability * Comparability
However, in order to meet all of these characteristics materiality must be achieved first. Materiality is not classed as one of the qualitative characteristics, if any information does not meet the objective of materiality then it needs not be considered for the financial statement. Therefore if something is not considered as material it then cannot be of use, relevant, reliable, comparable or understandable. I am going to look at each characteristics in more detail in order to understand why these characteristics are important to the preparation and creation of financial statements.
Understandability is ensuring that the financial statements are understandable to the user, if the user can not understand the information then the objective has not been met. The understandability of financial statements varies on the ability of the user, therefore a reasonable knowledge of business and accounting has to be assumed. However, no information should be excluded based on the fact it may be too difficult for the average user to understand. All relevant information must be included.
Relevance is
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