Explain why principles based standards require a conceptual framework

How can a misstatement in one financial statement, whether intentional or not, affect a presentation in another financial statement? Give an examp Identify and describe the sources of generally accepted accounting principles -Topic 1:

Explain why principles based standards require a conceptual framework

Accounting Theory Asked Jun 7, The following article provides some background about this decision.

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A new conceptual framework project The FASB and IASB have just begun a new joint agenda project, to revisit their conceptual frameworks for financial accounting and reporting.

Each Board bases its accounting standards decisions in large part on the foundation of objectives, characteristics, definitions, and criteria set forth in their existing conceptual frameworks.

To be principles-based, standards cannot be a collection of conventions but rather must be rooted in fundamental concepts. For standards on various issues to result in coherent financial accounting and reporting, the fundamental concepts need to constitute a framework that is sound, comprehensive, and internally consistent Without the guidance provided by an agreed-upon framework, standard setting ends up being based on the individual concepts developed by each member of the standard setting body Standard setting that is based on the personal conceptual frameworks of individual standard setters can produce agreement on specific standard-setting issues only when enough of those personal frameworks happen to intersect on that issue.

However, even those agreements may prove transitory because, as the membership of the standard-setting body changes over time, the mix of personal conceptual frameworks changes as well. As a result, that standard-setting body may reach significantly different conclusions about similar or even identical issues than it did previously, with standards not being consistent with one another and past decisions not being indicative of future ones.

That concern is not merely hypothetical: The IASB Framework is intended to assist not only standard setters but also preparers of financial statements in applying international financial reporting standards and in dealing with topics on which standards have not yet been developedauditors in forming opinions about financial statementsand users in interpreting information contained in financial statements.

Those purposes also are better served by concepts that are sound, comprehensive, and internally consistent.

Explain why principles based standards require a conceptual framework

In contrast, the FASB Concepts Statements state that they do not justify changing generally accepted accounting and reporting practices or interpreting existing standards based on personal interpretations of the concepts, one of a number of differences between the two frameworks.

The Boards have been pursuing a number of projects that are aimed at achieving short term convergence on specific issues, as well as several major projects that are being conducted jointly or in tandem.

Moreover, the Boards plan to align their agendas more closely to achieve convergence in future standards. The Boards will encounter difficulties converging their standards if they base their decisions on different frameworks.

Some of our constituents accept those concepts. That is because those documents are in need of refinement, updating, completion.

The planned approach in the joint project will identify troublesome issues that seem to reappear time and time again in a variety of standard-setting projects and often in a variety of guises.

That is, the focus will be on issues that cut across a number of different projects. Because it is not possible to address those cross-cutting issues comprehensively in the context of anyone standards-level project, the conceptual framework project provides a better way to consider their broader implications, thereby assisting the Boards in developing standards-level guidance Excerpts from Halsey G.

Explain why principles-based standards require a conceptual framework. It is suggested that several parties can benefit from a conceptual framework.Learn why the Common Core is important for your child.

What parents should know; Myths vs. facts. The FASB's current Concepts Statements and the IASB's Framework, developed mainly during the s and s, articulate concepts that go a long way toward being an adequate foundation for principles-based standards.

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Glossary of NIH Terms

IASB and FASB are working on a joint project to develop a common conceptual framework that is based on the existing conceptual frameworks underlying GAAP and IFRS. The objective is to develop a conceptual framework that leads to standards that are principles-based and internally consistent and that leads to the.

Footnotes. 1. 42 U.S.C. ยงยง , () (codified as amended).

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The analysis in this guidance applies to federal sector complaints of non-affirmative action employment discrimination arising under section of the Rehabilitation Act of Accounting and Business magazine is a rich source of CPD.

If you read it to keep yourself up to date, it will contribute to your non-verifiable CPD. The Conceptual Framework's purpose is to assist the IASB in developing and revising IFRSs that are based on consistent concepts, to help preparers to develop consistent accounting policies for areas that are not covered by a standard or where there is choice of accounting policy, and to assist all parties to understand and interpret IFRS.

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