Discuss about the Conceptual Framework Evaluation in Accounting System.
The International Accounting Standards Board (IASB) serves as the technique of revised conceptual framework of accounting for superior financial reporting. The conceptual framework of accounting offers common financial reporting instances along with concepts of financial statement and fundamental accounting. The accounting frameworks such as IASB develops ways to explain accounting information, identify financial events and report them within accounting system (Cajaiba-Santana 2014).
The accounting frameworks also facilitate development of assumptions regarding reasonable competence level on the behalf of the users in realizing the associated accounting matters. Accounting conceptual frameworks has a vital role in establishing and implementing the accounting standards that can be increasingly helpful in dissemination of significant accounting information. The conceptual framework of accounting indicates and contributes to the reveled mission of IFRS foundation including the board in order to develop standards of financial reporting that helps in bringing transparency, accountability and effectiveness within the financial markets all over the world (Macve 2015).
Benefits of Accounting Conceptual Framework
The exposure draft mentioned within IASB accounting standard indicted that the conceptual framework for financial reporting explains the objective and the concepts focused on the general purpose financial reporting. The benefits associated with accounting conceptual framework use are mentioned under:
- Accounting conceptual framework facilitates the board to implement standards those are relied on consistent concepts
- Accounting conceptual framework assists preparers to implement consistent accounting policies at the time no standard is applicable to specific event or transaction at the time accounting standards offers choice of accounting policies (Baumgartner 2014).
- Assist all the parties to realize and interprets the accounting standards
Accounting conceptual frameworks has certain advantages for these companies those implements them. For instance, IFRS accounting standard is widely accepted as high quality and transparent international standards that facilitates companies in maintaining consistency and comparability. Companies those employ IFRS accounting standards can observe that their financial results can easily be compared for evaluating performance that can be reflected within the company’s income statement (Henderson et al. 2015).
Criticisms of Current Accounting Conceptual Framework
The current “accounting conceptual framework (2010)” was criticized, as it did not offer a suitable framework for standard setting. Such insufficiency is observed by “Financial Accounting Standards’ Board (FASB)” standards that further turned out to be extremely rule-based. The “Financial Accounting Standards Board” has problems for the recent accounting standards did not facilitate companies to explain information those are interpretable and helpful for financial consumer (Cajaiba-Santana 2014). The recent accounting standards are criticized stating that these standards are becoming extremely rule-based that results the companies n structuring transactions in their own favor. This might hamper the users to gain adequate information for effective decision-making.
Moreover, FASB’s recent conceptual framework has also been disapproved of for remaining insufficient in directing the standard set (Henderson et al. 2015). Considering certain issues associated with the recent accounting conceptual framework requires being altered and it requires being changed in order to generate principal-based accounting standards those can be more useful in maintaining financial reporting transparency of companies.
Baumgartner, R.J., 2014. Managing corporate sustainability and CSR: A conceptual framework combining values, strategies and instruments contributing to sustainable development. Corporate Social Responsibility and Environmental Management, 21(5), pp.258-271.
Cajaiba-Santana, G., 2014. Social innovation: Moving the field forward. A conceptual framework. Technological Forecasting and Social Change, 82, pp.42-51.
Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision, Tool, Or Threat?. Routledge.