The Conceptual Framework Of Financial Statements

Boundless (2015) said that a Conceptual Framework can be defined as a system of concepts and purposes that guide to the creation of a constant set of regulations and standards. Especially in accounting, the rule and standards set by the nature, function and limit of financial accounting and financial statements. IFRS(2015) stated that the purpose of the Conceptual framework is to enhance financial reporting and objective of accounting by offering a more accomplish, clear and updated set of concepts or guidelines. In Conceptual Framework, it will form a basis for define how transactions should be calculated (historical value or market value) and reported in financial report like how they are presented or communicated to internal or external users. To carry out this, the International Accounting Standards Board (IASB) is establishing on the currently existing Conceptual Framework updating it, enhancing it and padding it in the disparity instead of essentially reconsidering all respects of the Conceptual Framework.

Accounting is the heart and soul of executing a successful business. Accounting is used to provide record for all items that are paid and received for a business over any period of time. Within the purpose of accounting lies the need to provide continuity and sustainability within a business, without it a business will not thrive. The information obtained is kept on record, in order to give insight to upper management on data concerning the daily revenue and expenses of that business. This data is needed to not only inform the employees of the business, but also the investing parties of that business as well. Success in business is equated to being accountable of all aspects of revenue and expenses. To

The conceptual framework was established by the Financial Accounting Standards Board (FASB) and is used to help define the boundaries of accounting. It gives definitions of key terms and establishes consistent standards by which fundamental issues are defined. This makes it easier to facilitate discussion and leads to greater efficiency in making accounting judgments.

The rules and laws created to structure the conceptual framework are created by government, professional associations, and guiding organizations. These organizations help formulate processes that create the rules and laws that focus the conceptual framework towards the needs of society. This begins with the formation of guiding organizations such as the SEC and the formulation of processes such as legislative due process. The fourth level ends with the formulation of rules and laws such as standards, principles, codifications, statues, interpretations, and regulations. When the process of accounting and

FASB – a coherent system of interrelated objectives and fundamentals that can lead to consistent standards.

The International Accounting Standards Board (IASB) issued and developed the new International Financial Reporting Standards (IFRS) as new international accounting standards after 2001. In 2006, the Chinese government issued a new set of Accounting Standards for Business Enterprises (ASBE) which are substantially consistent with IFRS.

A brief summary of recent global accounting is needed to understand what the international area standards are and how they work. In 1973 the International Accounting Standard Board (IASB) was created, an independent entity of the private sector. The IASB was created, among other functions, for the preparation and issuance of International Financial Reporting Standards (IFRS). The entity already existed previously, under a different name, but it was until after 1973 that it actually had the strength to organise a movement of change in the accounting aspects at world level. The headquarters of the IASB is located in London, and has the experience of more than 140 different professional accounting entities. According to the website http://www.ifrs.org/About-us/Documents/Who-We-Are-English.pdf the IFRS foundation and the IASB were established in 2001.

Financial statements are used by government and its agencies to formulate policies to regulate the activities of business, to formulate taxation policies, to compile national income accounts.

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;

Another beneficiary of the framework would be the accounts standards setters as they have this tool to use as a baseline when solving accounting and reporting issues. While it does not provide all the solutions, the framework restricts the range of alternatives to be considered by

A conceptual framework is a statement of generally accepted theoretical practices which form the base of reference for financial reporting.

The IASC Board approved the IASB (International Accounting Standards Board) Framework ( in April 1989) which was a successor of the IASC Board, and it accepted its Framework in April 2001 (Wells, 2011). International standards are developed by IASB which are named International Financial Reporting Standards (IFRS). Although IASB took the place of IASC with its accounting standards, its IAS (International Accounting Standards) was enforced by IASB and available into practice until now. The conceptual framework is helpful when it is used to develop the setting of International accounting standards. First of all, the definition of conceptual framework provided by Melville (2014, p. 17)[ Melville, A. (2014). International Financial Reporting.(4th ed.). Edinburgh Gate:

The process of developing common conceptual framework was planned to take place in 8 phases. It covers the entire details of financial reporting beginning from the objectives and desired characteristics of financial reports, to the definition of the elements, the recognition and measurement of those elements, and the form and content of financial reports. (Ref 4). A timeline is adopted for each stages of the process and is expected to be completed in total three to five years in different phases.

A conceptual framework can be considered as a normative accounting theory. Relying on the various assumptions about the types or associates with the information useful for decision making. It directs in interest of what

Firstly, the purpose and role of the conceptual framework is a set of tools used to assist the IASB in developing and revising existing IFRS in order to adapt to various situation.(Brower.A,2015). Moreover it also has to promote harmonisation of regulation, accounting standard and procedures relating to presentation of financial statement in order to reduce the number of alternative accounting treatments. Additional other than helping the IASB it also have to inform interest party of the IASB with information about how it works and the formulation of