The Conceptual Framework Of Financial Statements

Decent Essays
1.0 Introduction:

As Miracel Griff (2014) stated accounting is a science that is involved in the reading, monitoring and assessment of the financial affairs of a business at any time. In accounting procedures one cannot make a rational choice without some framework of principle (Macve, 1981).
The Conceptual framework was introduced in 1989 by the International Accounting standard board also known as IASB. A conceptual framework comprises of a set of basic principles that give general support and can assist with detailed decisions by increasing the like hood of consistency and reducing the cost of analysis. In financial reporting, a conceptual framework sets out the concepts that underlie the preparation and presentation of financial
…show more content…
The consistency and comparability that is present due to the standardization of the principles generates a continues development and enhancement of the framework in order to be consistent and therefore is considered positive and therefore recommended (Potter 2005). As nothing can be complete without continuous improvement as time changes and therefore regulations and principles need to be revised continually. Also Macve (1997) adds by stating that the framework will guide standard-setters to build accounting rules based on a solid set of fundamental principles.

Without A conceptual framework, the standard setters often acceded to external pressure from interest groups leading to haphazard and vague rules and guidelines. With a defined framework, however, standard-setters are made more accountable to users. Making users clearly aware and able to recognize parting from the principles set out (ASB 1999).
Therefore conceptual framework promotes fundamental principles which can assist national standard-setting bodies in developing national standards.

By using the framework It gives a guide to prepares of financial statements of how information
Get Access