Accounting Theory and Contemporary Issues

Running head: ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Accounting theory and contemporary issues
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1ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Table of Contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................2
Answer 3....................................................................................................................................3
Answer 4....................................................................................................................................3
Answer (a)..............................................................................................................................3
Answer (b)..............................................................................................................................4
Reference....................................................................................................................................5

2ACCOUNTING THEORY AND CONTEMPORARY ISSUES
Answer 1
Main purpose of Conceptual framework is assisting IASB to develop and revise the
IFRSs based on the consistent concepts. It plays an important role in setting and issuing the
accounting standards those must be followed by the preparers (Aasb.gov.au 2018). It presents
the concepts regarding financial reporting, measuring the accounting information,
fundamental accounting concepts, recognising financial activities and presenting them in
accordance with proper system of accounting.
Advantages of conceptual framework are as follows –
 It clarifies conceptual underpinnings for the accounting standards and it allows the
standards setters in develop the standards
 It assists the auditors, preparers and users of the financial reports to understand
approaches related to the standards settings, function and nature of reported financial
information.
 It provides the basics for all the rationale and objectives (Bauer, O'Brien and Saeed
2014)
Criticisms and problems raised for current conceptual framework are –
 It provides numerous guidance to setters of the accounting standards which in turn
create rigidity among them as introduction of new ideas become difficult
 Different users are there for the financial statements prepared by the entity. However,
one specific framework does not serve the purpose of all the users.
 Countries with low level of economic development find it exorbitant as it is time
consuming and expensive (Bauer, O'Brien and Saeed 2014)
Answer 2
Primary users of GPFR (general purpose financial reporting) are the potential as well
as the current investors, creditors and lenders who use it for making vital decisions such as
holding, selling or buying the debt instrument or equity, offering loans to the entity,
exercising voting rights or influencing the managements actions that may impact the use of
economic resources of the entity. Primary users of the financial statement require information
regarding the entity’s resources not only for assessing the future prospects of the entity’s net