The Conceptual Framework For Financial Reporting

The conceptual framework is an attempt to provide a metatheoretical structure for financial accounting. SFAC No.3 defines 10 elements of financial statements. It is obviously a resolution of the definitions presented in the discussion mem for the conceptual framework project. Elements are what accounting professionals measure and the attributes is about how to measure. Definitions can be helpful to the financial statements which have been formulated in order to help professionals to specify the qualification are. Also, the definitions must be expressed in the metatheoretical structure.

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” (FASB.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

The field of accounting is constantly evolving. This is true not only for the theory of accounting itself but also the entities that govern its theory and practice. Presently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are faced with some of the biggest challenges to date. To understand the significance of these two boards, it is necessary to understand their histories, relations between the boards, and the standards that they set. Also how the knowledge of these boards and the field they lead, gained through the masters of science in accountancy

The globalization of markets over the past 50 years has led to the demand for increasingly comparable financial statements across countries. In response to this demand, the International Accounting Standards Board (IASB) was formed with the purpose of developing a set of high quality global accounting standards. Although a majority of developed markets have adopted the international standards, the United States has not. One reason for the delay in adoption is that many of the standards are very similar. However, there are also several key differences between the two. Presently, the United States Financial Accounting Standards Board (FASB) and the IASB have

The IASB and the FASB have both established frameworks for the reporting of financial information, however, despite their apparent similarities several key differences exist between their structures. For example, U.S. GAAP has been traditionally defined as being a more rules-based standard, which has established strict guidelines and contingencies for reporting financial information. Given its history and the recent tumultuous financial environment, particularly the 2008 financial crisis, U.S. GAAP has become a very robust and strictly enforced set of standards. This has given rise to concerns that some preparers of financial statements may commit accounting fraud by circumventing or manipulating the rules of U.S. GAAP. Supporters of IFRS argue that “the more detailed the guidance, the greater the opportunity to find the loopholes in the guidance” (Hillman, Heaston, and Dodd 5). Despite these concerns, however, U.S. GAAP continues to be the preferred standard of most accounting professionals. Conversely, IFRS is a principles-based standard. The principles-based approach of IFRS grants management the discretion to use different accounting methods when preparing financial data. While this practice is praised for its focus on fair values and the freedoms it provides managers, it is often criticized for being far too subjective and inviting “a human element that could increase the risk of financial

increased international compatibility of accounting standards should occur, because they are developed in the context of a conceptual framework that is similar to the conceptual frameworks used by the International Accounting Standards Board (IASB) and major overseas national standard setters;

Accounting as a profession has its standards that must be followed. The standards are used across the world to enhance uniformity in the reporting framework of financial statements. This is due to the growth in the international trade and cross-boundary trade. Some of these standards include the international financial reporting standards (IFRS), the UD Generally Accepted Accounting Standards (GAAP).

The international financial accounting standards is a non for profit private sector. Their aim is to serve the public interests. With the growing globalisation of business and finance, it has stimulated a standardisation of accounting standards among countries. This measure aims to

Under the lead of the IASB, countries have implemented or are in the process of adopting IFRSs as they seek to develop a single set of high quality, understandable, enforceable and globally recognised financial reporting standards based on clear articulated principles (IFRS Foundation, 2014). Unfortunately regulations have failed to achieve the desired outcome for a number of reasons. Firstly argued by Elliott and Elliott (2012) information overload is a key factor, as they state standards are too detailed when rule-based and too vague when principle-based leading to a lack of clarity and increased confusion, which in turn, leads them to question the usefulness of IFRS. Secondly, the business environment occurs at the rapid pace with millions of transactions taking place around the world. As business develops and becomes increasingly complex, the legislation process too becomes prolonged when revising outdated or implementing new standards. Lastly, professional judgement is required if there is no standard created for a particular transaction or if a particular standard requires the use of judgement i.e. IFRS 15 – Revenue from contracts with customers. According to IFRS, income can be split into revenue and gains, however defined, one accountant may deem a certain transaction as revenue whereas another accountant may see it as a gain. As professional judgement is required, it is important to note the IASB framework should be consulted

In recent years, technological developments have permitted the free flow of information worldwide. The financial world is challenged by disparate accounting standards between jurisdictions, preventing the free flow of capital worldwide. The mission of the International Accounting Standards Board (IASB) is to develop a single set of accounting standards, enabling capital to flow in international markets as easily as information spreads between people. This paper presents a brief history of international accounting standard setting and the IASB, considers arguments for and against international standards, analyzes problems to overcome before standards can be implemented worldwide, and evaluates the level of global acceptance of

The IASB framework was approved by the IASC Board in April 1989 and adopted by the IASB in April of 2001. They set out the perceptions that underlie the provision and presentation of financial statements. The concepts that underpin the presentation of the statements deal with following;

Accounting standard set has become debatable topics in regards its function in real business. The standards of accounting have been developed throughout years and many countries has applied different accounting standard. However, as business world has become interconnected, there is an urged in need to have one stand-alone of accounting standards that could use worldwide. Therefore, many countries developed convergence of their accounting standard into International Financial reporting standard (IFRS) by International Accounting Standard Boards (IASB). According to Barth et al (2008) International Accounting Standards Committee (IASC) and the next follower the International Accounting Standards Board (IASB) have a goal to develop an International standard of High quality financial reporting standards. The standard is become important in regards to financial statement users that should enhance the transparency and integrity of each account in the statement. The transparency and integrity have crucial roles towards the effectiveness of capital markets functions, allocation of capital efficiency, and global financial stability and economic growth stability (IASB, 2013).

The IASB Conceptual framework for Financial Reporting (the ‘Conceptual Framework’) with its accounting standards becomes important for the reason that the business is more complex, and there are various definitions of accounting information in different countries. In this essay, for the first part, it would be discussed whether the conceptual framework is beneficial or not to the development of International accounting standards with several examples. For the second part, it would be also examined that IASB framework with its accounting standards is developed from country to country, and there are differences which have also been caused by a variety of economic, cultural as well as linguistic circumstances.

The International Accounting Standards Board (IASB) is revising its Conceptual Framework to improve and clarify the ways financial statements are prepared and presented. The process began in 2004 with a preliminary discussions between the US Financial Accounting Standards Board (FASB) and the IASB. Work was suspended in 2010 then revived in late 2012 as an IASB-only project. Work is still ongoing, with a preliminary discussion paper released in 2013 aiming to collect comments to develop an Exposure Draft will be published in early 2015.

“The Objective of the Conceptual framework project is to improve financial reporting by providing a more complete, clear and update set of concepts” (IFRS.org). Although the current framework has been crucial in to the IASB when developing and revising IFRS’s there have been a few problems. There are areas that are uncovered, limited guidance and out of date areas. In July 2013 the IASB issued a discussion paper which is designed to explore potential changes to the IASB’c conceptual framework and the possibility of a revised framework. “The Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements“ (JULY 2013). This discussion document is the first step to a revised