CHAPTER 2 The Conceptual Framework for Financial Reporting LEARNING OBJECTIVES After studying this chapter, you should be able to: 2.1 explain what a conceptual framework is 2.2 understand the history and current developments in the Conceptual Framework for Financial Reporting 2.3 outline and contrast the structure and components of the Conceptual Framework and Proposed Framework 2.4 understand and apply prudence and the recognition criteria in the Proposed Framework 2.5 explain and evaluate the benefits of conceptual frameworks 2.6 explain and evaluate the problems and criticisms of conceptual frameworks 2.7 apply concepts from conceptual frameworks to financial reporting issues 2.8 understand conceptual frameworks applicable to other sectors. Copyright @ 2017. Wiley. All rights reserved. Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-05-02 17:05:10.
Professional Conceptual Framework Scope Objectives and reporting entity --- Copyright @ 2017. Wiley. All rights reserved. Technical Benefits Political Qualitative characteristics What is included? Elements and recognition How? Measurement and presentation Accounting standards Financial statements I Users Faithful representation concept Problems Descriptive, not normative Does not work in practice CHAPTER 2 The Conceptual Framework for Financial Reporting 35 Rankin, Michaela. Contemporary Issues in Accounting, 2nd Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/swin/detail.action?docID=5049576. Created from swin on 2021-05-02 17:05:10.
From your previous accounting studies, you will already be familiar with some parts of the Conceptual Framework for Financial Reporting (Conceptual Framework), although you may not have looked in detail at the Conceptual Framework itself. For example, the definition of assets and liabilities that are in many of the accounting standards that you have studied will have come directly from an accounting conceptual framework. It is important to consider the Conceptual Framework, as influences on this, and changes, will significantly impact on the accounting standards that are used to direct financial reporting. Conceptual frameworks have been dominant internationally in the theories of accounting for the past 30 years. This chapter considers the conceptual frameworks developed and proposed by the International Accounting Standards Board (IASB) and looks at some of the reasons for having a conceptual framework in accounting and some of the criticisms of and problems with the current framework. The application of conceptual framework concepts to financial reporting issues is also considered, before briefly discussing conceptual frameworks relating to entities in other (non-profit) sectors. Copyright @ 2017. Wiley. All rights reserved. 2.1 The role of a conceptual framework LEARNING OBJECTIVE 2.1 Explain what a conceptual framework is. A conceptual framework is a group of ideas or principles used to plan or decide something. It can be seen as a set of guiding principles - that is, those ideas or concepts that influence and direct decisions being made in a particular area. Conceptual frameworks are not only found in accounting but are used in many areas to help establish specific guidelines, make decisions or solve problems. For example, your lecturers will use a set of prin- ciples relating to the purpose of professional education and principles of adult learning