Accounting Theory and Contemporary Issues PowerPoint Presentation 2022

ACCOUNTING THEORY AND
CONTEMPORARY ISSUES

CONCEPTUAL FRAMEWORK IN
ACCOUNTING
The conceptual framework in accounting reflects a system that is interrelated to objectives of financial
reporting, characteristics of accounting information, elements of financial statement, transactions and
principles.
BENEFITS
 Helps to set Accounting Standards.
 Provides comparability and consistency of financial statements
 It increases efficiency and better communication in financial statements.
 It builds up confidence and understanding to the users in company’s financial report (Sheppes et al. 2014).
LIMITATIONS
 Entities can get affected in developing and selecting the policies when no standard has applied to a
transaction as conceptual framework is not a standard.
 Conflict can arise due to difference in preceding accounting standard and current conceptual framework.

GENERAL PURPOSE FINANCIAL
REPORTING
The basis of the conceptual framework is objective of general purpose to provide financial
information related to the reporting entity that can be useful for the investors or other creditors in
making a fruitful decision for themselves. In 2010, the revised framework has added two new
chapters that deals with the objective of general purpose financial reporting (Ifrs.org 2019). To this
IASB has to reconsider to give prominence in the financial reporting, reintroduce prudence notion,
consider more on a faithful presentation instead of legal and clarify measurement uncertainty.
However, there is possibility that it cannot provide overall relevant information that is needed to
the investors and other creditors. The key users of the entity’s financial statement are the investor
or lenders who are providing capital to them. Potential investors get it from other sources like the
economic conditions, political climate and events or company outlooks. Thus, this matter should
be resolved. In addition, the basic elements of the financial statement should clearly defined
(Lawrence 2013). It is necessary that financial statement should give more importance to the
perspective of investors. Rather than to focus on change in shareholders or owners, it more focus
should be on the resources of the entity.