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Conceptual framework for financial reporting - Essay Example
The concept of the conceptual framework can be regarded as recent in the field of business and accounting. In the past, people involved in the setting of accounting standards used to operate in the absence of conceptual frameworks. …
This made accounting standards haphazard, and many scandals could be witnessed (Alexander et al. 2007, p.150). This saw the introduction of ‘a conceptual framework for financial reporting.’ The aim of this paper is to examine what a conceptual framework for financial reporting is, and discuss the usefulness of such a framework. In addition, the paper will assess whether conceptual frameworks such as the International Accounting Standards Board for the preparation and presentation of financial reports has succeeded in achieving the stated objectives.
What is a conceptual framework for financial reporting?
The conceptual framework for financial reporting refers to a set of standards that public sector entities use to guide them in preparing financial statements. The standards in a conceptual framework establish the guidelines to be used in developing International Public Sector Accounting Standards, as well as other concepts that give guidelines about information that will be contained in financial reports (IASB, 2010). The conceptual framework focuses on the financial statements that business enterprises, including state owned corporations, should prepare and present annually in order to meet the information needs of users of financial statements (Zeff 2000, p.8). The IASC Board approved the Conceptual Framework for the Preparation and Presentation of Financial Statements in April 1989; the framework was later published in July the same year. In April 2001, the IASB adopted the framework (Bragg 2010, p.16).