Building the Foundations of Financial Reporting: The Conceptual Framework
CPA Journal, The › Vol. 77 Nbr. 8, August 2007
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Summary
The Financial Accounting Standards Board (FASB), together with the International Accounting Standards Board, has embarked on a project to rebuild the foundations of financial reporting by revising the Conceptual Framework. The Conceptual Framework is like a constitution for financial reporting, providing the foundation for standards. The Conceptual Framework provides structure to the process of creating financial reporting standards and ensures that standards are based on fundamental principles. The project to revise the Conceptual Framework will involve the examination of the foundations of financial reporting and, indeed, accounting itself. The existing Conceptual Framework was written by FASB in the 1970s and 1980s. When issued, it represented a significant advancement of accounting thought and provided a basis for the transformation of financial reporting standards through the adoption of the asset-liability view. Although the Conceptual Framework may seem far removed from the day-to-day world of accounting, it has far-reaching implications for financial reporting and the accounting profession.
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Building the Foundations of Financial Reporting: The Conceptual Framework
The Financial Accounting Standards Board (FASB), together with the International Accounting Standards Board (IASB), has embarked on a project to rebuild the foundations of financial reporting by revising the Conceptual Framework. The Conceptual Framework is like a constitution for financial reporting, providing the foundation for standards. The Conceptual Framework provides structure to the process of creating financial reporting standards and ensures that standards are based on fundamental principles. This helps prevent standards from becoming ad hoc and transitory. Without a framework, accounting standards might be based on the most expedient solution to a particular issue, radier than a solution that is consistent with a unified theory of accounting. The Conceptual Framework is an essential element in the development of principlesbased accounting standards.
The Conceptual Framework makes standards setting more efficient by providing...See the full content of this document
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