Conceptual Framework of Financial Reporting

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Individual assignment

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Answer 1: Brief Background and Role and Issues Related to Conceptual Framework of
Financial Reporting
The International Accounting Standards Board (IASB) has established the Conceptual
framework of financial reporting in order to establish the fundamental concepts for providing
guidance to the board for developing IFRS standards The IFRS standards provides assistance to
the companies in adopting significant accounting policies for reporting of their financial
information. IASB has recently updated the conceptual accounting framework for revision of the
IFRS standards to provide improved guidance to the business in context of adopting the
measurement concepts and defining assets and liability (IFRS Foundation, 2016). The main
objective is to strengthen prudence and stewardship in the financial reporting. The major benefit
associated with the CF is to facilitate the resolution of the accounting problems by providing
guidance to the accounting standards markers such as IASB. However, the major issues
associated with its international adoption are difficulty in establishing as it is time consuming
and rather expensive to implement it in an effective manner (IFRS: About Us, 2018).
Answer 2: Objective of General Purpose Financial Reporting
The major objective of the general purpose financial reporting is to develop and disclose
significant financial information about a reporting entity to its present and future stakeholders
such as investors, lenders and creditors. The financial information need to be provided to the
different stakeholders of a reporting entity for providing assistance to them in decision-making.
The decisions can be significantly related to buying or selling of equity and debt instruments of
the entity and investing the significant resources within it. The financial information need to be
faithfully represented to all the stakeholders as per the general purpose reporting framework.
This is important to protect the interest of the stakeholders by depicting its actual financial
position in the mind of the stakeholders (IFRS: About Us, 2018).
Answer 3: Prudence in accounting
Prudence refers to the key accounting principle and it is also known as conservatism
principle. The role of this accounting principle is to make sure that all the assets and income are
not overstated and provisions or reserves are made for all losses and expenses. It is compulsory
to make the provisions for losses and expenses whether the amount is certain or it is just