Importance of Conceptual Framework for Financial Reporting

The study aids in accepting overall framework document to institute the notions that inspire overall preparation as well as demonstration of financial assertions for exterior users as established in particularly conceptual framework for chiefly financial reporting.

Running head: ADVANCED CORPORATE REPORTING
Advanced Corporate Reporting
University Name
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Authors’ Note

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Abstract
The study aids in theaccepting overall framework document to institute the notions that
inspire overall preparation as well as demonstration of financial assertions for exterior users
as established in particularly conceptual framework for chiefly financial reporting.The
present discussion representsthe accounting framework that is necessarily a coherent system
of different inter-associated objectives as well as fundamentals that have the need to direct
towards consistent standards that prescribe overall nature, operations as well as limitations of
financial accounting as well as financial assertions.

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Table of Contents
The Conceptual Framework.......................................................................................................4
Introduction................................................................................................................................4
Background of the study............................................................................................................4
An overview of the main theory or theories that are relevant to the selected topic and used in
the selected journal papers.........................................................................................................6
Findings of the review..............................................................................................................12
Conclusion................................................................................................................................13
Reference..................................................................................................................................15

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The Conceptual Framework
Title of the report: Importance of the Conceptual Framework for Financial Reporting
Introduction
The current study indicates towards an accounting framework that is necessarily a
coherent system of different inter-associated objectives as well as fundamentals that have the
need to direct towards consistent standards that prescribe overall nature, operations as well as
limitations of financial accounting as well as financial assertions. The primary cause behind
developing a conceptual framework is that it provides a framework for establishing standards
of accounting, groundwork for resolving different accounting disputes as well as fundamental
principles which then need not be repetitive in standards of accounting (Lattucaand
Litzinger2015). Moreover, conceptual framework can necessarily be classified in respect of
distinctive function of particularly firm’s management accounting. Furthermore, the way in
which overall utility of results of management accounting procedures can be examined.
Basically, conceptual framework can be considered to be criteria that can be utilized to
evaluate overall value of the procedures along with work technologies utilized in
management accounting as well as capabilities essentially related to efficacies of
management accounting function on the whole.
Background of the study
Conceptual Framework is said to play a significant part in the process of accounting.
This is mainly due to the fact that conceptual framework aids in better comprehension of
information of accounting. Moreover, conceptual framework helps in promoting
harmonization by delivering a basis for selection of most of appropriate treatment of
accounting allowed by financial standard of accounting. In essence, this also aids in dealing

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with specific events, business dealings, specific conditions or else circumstances. As such, it
can be hereby mentioned that this specific framework can aid users of financial assertions in
comprehending information enclosed in financial assertions prepared in compliance with
financial standards of accounting.
Ravitchand Riggan (2016) asserts that conceptual framework also lead towards
development of financial accounting standardin the upcoming period as well as regulation of
different subjective judgement by administration whilst preparation of financial assertion as
well as another financial assertions. In addition to this, this assists in the process of
establishing national standards that can help in establishing particular bodies in enhancing
national standards of accounting. Furthermore, this delivers the ones interested in functions
with information regarding the approach to designing financial standard of accounting.
Therefore, according to the viewpoints of Ngai, Taoand Moon (2015), conceptual framework
can absolutely be regarded as a significant document for the entire board along with the
constituent. Therefore, it can be hereby mentioned that chief usage of the framework is to
ensure that this framework delivers an essential conceptual underpinning that aids the entire
board in addressing diverse issues.
As rightly indicated by Imenda (2014), conceptual framework can be considered to be
imperative for financiers. It is mainly owing to the fact that this delivers the risk capital to all
the financiers and consultants as well as advisors is considered withrisk inherent from
investments. In essence, this information is required to assist in the process of ascertainment
of whether it needs to be sold, bought or else hold shares. In itself, information can facilitate
the capability of the business enterprises to disburse dividends interests by particularly
shareholders. In essence, employees as well as their representative groups are also concerned
about the stability as well as profitability of workforces (Arnold2014). The information can

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allow them to evaluate the capability of the corporation to provide retirement benefits,
opportunities of employees as well as remuneration.
Furthermore, this helps lenders to ensure that their loans as well as interests will be disbursed
when outstanding. Next, the information of the total amount of wealthborrowed by various
suppliers as well as trade creditors is significant for them as it might ascertain whether the
wealth will be disbursed when owed. As correctly mentioned by Green (2014), trade creditors
essentially have an interest towards a business enterprise over short term than lenders unless
they are needy on the continuance of the firm as a major purchaser. In addition to this,
business concerns are also fascinatedin the information regardingcontinuance of the business
concerns, particularly during development of the business concern during the long term.
Ultimately, allocation of varied resources as well as actions of business concerns is crucial
for government as well as their agencies. Fundamentally, this information helps in the
process of ascertainment of policies of taxation, as the foundation for national earnings,
ascertain taxation strategies as well as identical statistics.
An overview of the main theory or theories that are relevant to the selected topic and
used in the selected journal papers
The article “Financial Accounting Knowledge, Conceptual Framework Projects and
the Social Constructions of the Accounting Profession” by Hines in 1989 essentially presents
the fact that professional practitioners have the authority to illustrate individuals as well as
circumstances, recommend as well as predicate outcomes for individual as well as for
community founded on definitions, determine what is standard, stigmatise else wise
normalise individual, scrutinize individuals and frame decisions. This article put forward the
fact that CF projects is a strategic attempt to help in socially developing appearance of a
differentiated base of knowledge for standards of accounting, thereby legitimising standards

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as well as power along with self-regulation of profession of accounting. Thus, projects on CF
are said to be carried out by professionals despite apparent failure of each and every project
particularly from technical as well as functional viewpoint. The article examined the entire
body of knowledge that is the base of financial accounting exercise. From analysis of body of
financial accounting facts presented in the article it can be hereby comprehended that it
stemmed that the knowledge core of particularly financial accounting is extremely
problematic, that is not exclusive to accountants and is necessarily differentiated from other
professional domains namely regulations. In essence, this raised the specific question
regarding the way accountants have attained an important success level in particularly
professionalism. A concise study of the nations as well as situations of conceptual framework
projects recommended that the chief rationale carrying out CF was necessarily not functional
else wise technical, but was a strategic scheme for delivering legitimacy for specific standard
establishing boards as well as accounting profession during competition or else endangered
government interference. As rightly indicated by Norrisand Bonventre 2015, projects on
particularly conceptual framework as political resources in the procedures of professionalism.
The professional article published by Australian Accounting Standards Board on
Importance of Conceptual Framework (CF) for Financial Reporting titled “Estimation
uncertainty and the IASB proposed conceptual framework” by Craig, Smieliauskas and
Amernic (2017) helps in understanding the usefulness of the same. This article mentions that
CF for financial reporting elucidates overall objective as well as notions for particularly
general purpose financial reporting. Essentially, this is illustrated as a practical tool that can
help in helping International Accounting Standards Board to design standards that are
founded on consistent notions (Yamauchi, Ponte, Ratliffe, and Traynor 2017). Also, this
helps several preparers in developing consistent policies of accounting at the time when no
standard is applicable to specific dealing else wise events else wise even when a specific

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standard permits a selection of diverse accounting strategy. In addition to this, this standard
also helps in helping understanding as well as interpreting specific standards. The
professional article pronounced by AASB explains that the primary aim of the general
purpose financial reporting is to deliver financial information regarding the reporting concern
that is effective to different subsisting as well as potential financiers, varied lenders along
with various other creditors in framing decisions concerning purchase, sell else wise holding
equity as well as debt instruments. In essence, these decisions undertaken by financiers
regarding purchasing, selling else wise holding both equity as well as dent instruments rely
on the returns earned from specific investments in different instruments (Singer, O’Brien, and
LeCloux, 2017). Also, this article elucidates in detail that there are several financiers along
with lenders as well as creditors that call for direct information from the reporting entities and
depend on general purpose financial reporting (GPFR). Nevertheless, GPFR cannot deliver
all information that is required for the users. In essence, to a great extent, different financial
assertions are mainly based on varied estimates, specific judgements along with models in
place of appropriate depictions. Kimand Sheridan, (2015) suggests that the CF institutes
varied notions that underlie these approximations, varied judgements as well as models.
Basically, the notions can be considered as the objective towards which presenters of
financial assertions strive. However, the overall vision of the CF is unlikely to be attained
entirely, as this takes time to comprehend, assume as well as execute novel ways of
evaluating business transactions as well as other events (Russell, Irwinand Williams2018).
Nonetheless, instituting an objective towards which to struggle is necessary in case if
financial reporting is to develop so as to enhance overall usefulness.
Article on Accounting theory and conceptual framework formulated by setters of
accounting standard by Yong, Lim, and Tan 2016 titled “Theory and practice of the proposed
conceptual framework: Evidence from the field” is necessarily founded on recognition of

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particularly “good practice” based on which specific principles are deduced inductively. In
essence, the criteria for the purpose of recognizing specific good practice are associated to
mainly the assumed objectives of financial assertions. Again, during the same time, specific
attention is paid to especially conceptual coherence as well as development procedures
typically involving tidying up of conceptual notions. Libby (2017) suggests that this
conceptual framework might perhaps be written in a specific prescriptive way else wise
descriptive manner, otherwise a combination of both. However, in any specific circumstance,
they are necessarily normative as they have the requirement to deliver a cluster of principles
as a lead to establishing as well as analysing standards of accounting. In essence, this kind of
guidance does not stop a standard from being declared for compelling pragmatic causes, goes
away from definite principle mentioned in the applicable conceptual framework. Essentially,
this framework is applicable to a wide range of models of accounting and delivers guidance
on preparation as well as presentation of financial assertion developed under the selected
model. During the current period, it is necessarily not the intention of the board to
recommend a specific model other than in extraordinary circumstances.
Another article on review of literature and conceptual framework by Zacca and Dayan
(2017) titled “Entrepreneurship: an evolving conceptual framework” helps in understanding
the coverage of the same suggests that this conceptual framework primarily covers the
notions that form a chief basis for the research. In essence, the conceptual framework mainly
comprises of a glance on particularly entrepreneurship as well as its evolution, discussion on
particularly entrepreneur (that discusses whether entrepreneurs are essentially or are made).
In addition to this, the conceptual framework also covers the notion of description of
specifically move and this includes market orientation as well as value enhancement. The
article mentions that development of specifically accounting theory need to be made possible.
Nilsen (2015) argues that specific notion need to have three different components namely,

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encoding of particularly phenomenon to essentially symbolic reflection, manipulation else
wise integration to regulations.
The conceptual framework can be said to be is like a constitution as said in the article
“Social innovation: Moving the field forward. A conceptual framework” by Cajaiba-Santana
(2014). The US Standards Financial Accounting Board in the defined a conceptual
framework can be said to be a coherent system of interrelated fundamentals and adjectives
that can lead to consistent rules and that prescribes the function, nature, and financial
accounting limits and the financial statements. The conceptual framework is needed in the
profession of accounting in order to relate and build on a body of concepts that is established
along with the objectives. In addition to that the conceptual framework provide an outline to
solve emerging and new practical issues. It also enhances the users ‘of the financial statement
for the understanding and providing confidence in the financial reporting (Zullig 2016). The
conceptual framework increased the comparability among the various financial statements.
The International Accounting Standard Board therefore is known as the IASB, establishes the
standards that can be outlined in the Framework for the preparing and presenting the
Financial Statements. The IASB that was framed in the year in 2001 and is referred to as the
body of standard-setting for the International Accounting Standards Committee (IASC)
Foundation, which is a private sector that is independent as is a body that not-for-profit and
the external IFRS Advisory Council supports them and an IFRS Interpretations Committee
offers guidance to them. The IASB is committed to develop for the interest of the public
along with a single set ofquality that is high and global standard of accounting that gives
transparent high quality and information that is comparable in general financial statements
purpose. In order to fulfil the duties of standard-setting the IASB follows a thorough, open,
and transparent due process of which the publication of consultative documents, such as
discussion papers and exposure drafts, for public comment is an important component. The

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IASB closely engages with the stakeholders all around the globe that includes the analysts,
investors, business leaders, regulators and accounting standard-setters the profession of
accounting. In order to peruse this purpose of the IASB conducts extensive public
consultation and seeks the co-operation of national and international bodies globally.
The study by Zhang and Andrew (2014) titled “Financialisation and the Conceptual
Framework” helps in understanding overall framework document to establish the notions that
underlie overall preparation as well as presentation of financial assertions for external users
as established in particularly conceptual framework for chiefly financial reporting. The
articles analysed herein helps in understanding coverage of the framework that includes
objectives, underlying suppositions, qualitative features, components of financial assertions,
overall recognition along with measurement of different components of financial statements
together with notions of capital as well as capital maintenance. Objectives are to deliver
financial information regarding financial position, financial performance as well as
alterations in pecuniary position. Essentially, financial position gets affected by various
economic resources, way the same is financially structured, liquidity as well as solvency of
the entity and capacity of the entity to adapt to alterations. Also, as per conceptual
framework, financial performance can be evaluated to forest overall opportunity to create
flows of cash from resources that the entity controls and to design judgements regarding the
way resource different resources are made effective. Again, the conceptual framework
mentions alterations in particularly financial position. In essence, overview of conceptual
framework also presents the way of analysing different actions such as investing, financing as
well as operating activities. This can analyse capability of the entity to generate overall cash
as well as cash equivalents. Furthermore, this includes evaluation of capability of the entity to
create cash well as cash equivalents, alterations in financial position can also be evaluated to
observe the way entity utilizes the flows of cash. Zhangand Andrew (2014) suggests that

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underlying assumptions is an important segment of the conceptual framework and mentions
about two different fundamental terms that are considered within the structure.
Fundamentally, these include accrual basis of accounting as well as going concern basis. In
essence, accrual basis of accounting primarily specifies that a particular entity need to
recognize overall impacts of transactions as well as other events at the time when they
happen and not when they are disbursed or at the time when the cash is accepted in
settlement. Furthermore, a business concern needs to identify all the business transactions
along with events in especially the financial assertions during the period to which they
associate. Again, the going concern basis refers to the fact that in case if financial assertions
are necessarily prepared on essentially the going concern basis, then this supposes that the
business entity shall continue to function for foreseeable period. In essence, this informs
diverse users regarding the fact that the business entity has the intention to liquidate else wise
materially curtail overall operations. Frynasand Yamahaki (2016) suggests that this article on
conceptual framework talks about qualitative characteristics that takes in comparability,
verifiability, and timeliness as well as understanding ability. The CF calls for enhancing
qualitative features that need to be optimised to great extent. On the other hand, this also
identifies that the enhancing featured cannot present information if same information is
irrelevant or else faithfully reflected. The implementation of enhancing features is necessarily
an iterative procedure and CF identifies that it does not follow a prescribed order. Further,
this article mentions about specific feature of the conceptual framework that includes
particular components of the financial assertions. The specific elements are said to include
assets, liabilities, earnings, expenditures as well as equity (Cohenand Shang2015). Moreover,
the CF also includes details about recognition along with measurement of different
components of financial assertions and notions of capital along with maintenance of capital.

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Findings of the review
The article titled the Financial Accounting Knowledge, Conceptual Framework
Projects and the Social Constructions of the Accounting Profession highlights the fact that CF
projects is a strategic attempt to help in socially developing appearance of a differentiated
base of knowledge for accounting standard, thereby legitimising standards as well as power
along with self-regulation of profession of accounting the second article The professional
article published by Australian Accounting Standards Board on the importance of
Conceptual Framework (CF) for Financial Reporting the overall vision of the CF is unlikely
to be attained entirely, as this takes time to comprehend, assume as well as execute novel
ways of evaluating business transactions as well as other events. Nonetheless, instituting an
objective towards which to struggle is necessary in case if financial reporting is to develop so
as to enhance overall usefulness. The third article on Accounting theory and conceptual
framework formulated by setters of accounting standard are necessarily founded on
recognition of particularly “good practice” based on which specific principles are deduced
inductively conceptual framework might perhaps be written in a specific prescriptive way
else wise descriptive manner, otherwise a combination of both. Lastly the article on review of
literature and conceptual framework helps in understanding the coverage of the same
suggests that this conceptual framework primarily covers the notions that form a chief basis
for the research. The conceptual framework increased the comparability among the various
financial statements. Based on analysis of the current article it can be hereby said that it is
imperative at the beginning to comprehend that the framework document is in itself is not
necessarily a standard. The primary function is to mainly help IASB in designing novel or
else amended standards of accounting and to help different preparers of financial assertions
implementing regulations and dealing with specific issues that are not covered by standards
of accounting.

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Conclusion
It can be concluded from the review of the above articles that the conceptual
framework aids in dealing with specific events, business dealings, specific conditions or else
circumstances. As such, it can be hereby mentioned that this specific framework can aid users
of financial assertions in comprehending information enclosed in financial assertions
prepared in compliance with financial standards of accounting.The study therefore helps in
understanding conceptual framework document to establish the notions that underlie overall
preparation as well as presentation of financial assertions for external users as established in
particularly conceptual framework for chiefly financial reporting.

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