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developing a conceptual framework is an impossible possibility - Essay Example
Author : edythe06
Finance & Accounting
Pages 7 (1757 words)
Developing a conceptual framework is an impossible possibility Name Institution Conceptual framework for accounting lies at the very base of financial accounting in the professional field. This is a component in accounting process developed to help accountants in carrying out their work…
It fixes a standard of financial accounting which, when followed, ensures consistency in the financial statements of different companies. The financial statements of different companies must be able to satisfy the needs of a variety of users who mostly want to compare one company with another. When a standard is followed by all the companies, the financial statements become reliable for the users as they can safely compare all the companies and make important financial decisions. Accounting, therefore, entails a statement of accepted accounting rules. These rules form the structure of reference for the financial reporting. The conceptual framework forms the foundation for expansion of new accounting criteria and the assessment of those standards that are already in place. Further, it forms the basis for establishing which events should be accounted for and how the same should be released to the accountants (Macve 1987 p. 11). Functions of conceptual framework Conceptual framework lays out the objectives of the financial statements. Financial statements are meant to reflect the financial standing of institutions. Conceptual framework of accounting therefore offers the foundation and the guidelines that should be followed to reveal the economic situation of an institution at a given period of time. ...