Finance & Accounting
Pages 8 (2008 words)
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DEVELOPING CONCEPTUAL FRAMEWORKS ARE A TIME WASTING ACTIVITY Contents Contents 2 Introduction 3 Conceptual Framework 4 Financial Accounting Theory 4 Conceptual Framework for Financial Accounting 7 Conclusion 9 References 9 Introduction This paper critically evaluates the conceptual frameworks in the context of financial accounting theories.


The financial accounting theory functions on the basis of conceptual framework, explains the observed accounting practices and predicts the unobserved practices. The theoretical framework of accounting evolved significantly in the 20th century following the market crash in 1929 and recent financial crisis. The major accounting theories, developed in 20th century are Efficient Market Hypothesis (EMH), fundamental analysis model, CAPM, positive accounting theory and critical perspective model. These theories were criticised by SATTA (Statement of Accounting Theory & Theory Acceptance) giving the reasons why these theories could not gain general acceptance. The main points of criticism were real world complexity, varying requirements of user groups, and failed interpretation of security price behaviour through EMH, costs of adopting accounting standards more than the benefits and limited capacity of users in assimilation and analysis of accounting information. Further, to understand the implications of conceptual framework example of the joint project of IASB and FASB for the convergence of their respective conceptual frameworks is discussed. ...
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