If there were no framework for preparing financial statement, accounting standards would be developed in a random, haphazard way to deal with issues as they arise. This would result in standards which would be inconsistent with each other or legislation.
By having a single conceptual framework, preparers and users of financial statements understand that accounting practices and accounting standards are based on this common ideology.
There are two underlying assumptions for the preparation of financial statements, these are
Recently we’ve had a request for a summary of the IASB Conceptual Framework.
You might remember the fundamental characteristics of useful financial information (per the IASB Conceptual Framework) are:
The IASB Conceptual Framework identifies two concepts of capital:
When an entity prepares financial statements it refers to a number of places for guidance on the correct method to prepare and present these statements.
The objective of financial statements is to provide information about the
The IASB Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements. It’s used by the IASB to develop new accounting standards, and provides the reasoning current accounting standards.