Conceptual Framework and Sustainability Reporting

Running head: CONTEMPORARY ACCOUNTING THEORY 1
Conceptual framework and sustainability reporting
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CONTEMPORARY ACCOUNTING THEORY 2
Executive summary
This report addresses the different aspects of a conceptual framework as per the
International Accounting Standards Board (IASB). The report is subdivided into two parts with
the first part of the report focusing on the different concepts that are entailed within the
conceptual framework of accounting. Further emphasis is attributed to assessing the different
limitations and strengths of the framework (AASB, 2015). This is however addressed basing on
two major perspectives. The first perspective of analysis is from the Australian accounting
professions and the other perspective is that of the concerns of the academic regarding the
applicability of the conceptual framework (AASB, 2013). The report as well covers the practical
look at the G8 Australian listed company and the pick n pay a South African listed company.
These are looked at in regards to assessing the use of the conceptual framework when
preparing financial reports. A literature review of the framework is as well presented in the
report for explanation purposes.
Introduction
The report will continue to provide a better understanding of the key concepts as
required. Definitions of significant terminologies will be provided within the body of the report.
Since the report is structured into two parts, the first part will mainly focus on the theoretical
aspects. These will include among others the limitations and strengths of the term conceptual
framework. The limitations of the academics together with those of the accounting professions
in Australia will be closely explained (AASB, 2018). The second part of the report will mainly
bring out some of the relevant theories that explain the topic of concern. In this assessment,

CONTEMPORARY ACCOUNTING THEORY 3
the applicability of the theories will be analyzed. The case studies for this applicability will be
the G8 Company and the pick n pay company of South Africa. The assessment will majorly
concern issues such as assets presentation, liabilities, and revenue.
Literature review of the conceptual framework (IASB)
Originally known as the framework for the preparation and presentation of financial
statements in 1989, the conceptual framework is was developed to assist in the development
and revision of the IFRSs. Since the IFRSs were prepared to base on consistency, the financial
accountants needed to fulfill such requirements. The other main aim was to help accountants
prepare clear and understandable financial reports (Adams, 2013). Especially for the public and
other interested parties. Therefore one can define a conceptual framework as a combination of
guidelines and procedures that are used when preparing consistent and clear financial
information (Amato and white, 2013). This framework was intended to be used in areas where
the guidelines and standards do not apply or in cases where an entity or an individual has a
choice to make regarding the rule to apply. This type of framework mostly became useful in the
US after the 1929 stock market crash. The framework was majorly aimed at recovering
confidence within the public as well as investors. Supervision of public entities was required
and it is upon such grounds that the United States Securities Exchange Commission introduced
the Generally Accepted Accounting Principles (GAAP) for preparing accounting information.
With the need to cope with other countries, the United Kingdom decided to form what is
known as the United Kingdom Reporting council in 2015. This was to work hand in hand with
the US- GAAPs despite the fact that it is mostly applicable to the UK and the Republic of Ireland.
This system has been commonly known as the new UK GAAP. In Australia, the conceptual

CONTEMPORARY ACCOUNTING THEORY 4
framework accounting system was adopted during the early 2000s. Before this period the
country relied on its national accounting standards and they had a relatively level of
performance. The incorporation of the IFRSs was simply a move to improve on quality,
relevance and other qualitative characteristics of the conceptual framework.
The Australian accounting professions concerns on the application of the framework
Many Australian accounting professions are bothered about the unrealistic model of
reporting that is required by the updated conceptual framework (barker and Teixeira, 2018).
They claim it has a number of limitations regarding the issue of preparing special purpose
reports for some entities. These limitations of the new conceptual framework are basically in
two aspects; these include determining the proper definition of a reporting entity, and secondly
the limitation regarding Special Purpose Financial Statements (SPSFS) and General Purpose
Financial Statements (GPFS). The accountants still have concerns as regards to the difference in
terms of defining the same concept of the conceptual framework (Bradford et al, 2017). The
Australian accounting standards board uses a system that is unique. The uniqueness of the
system is supported by the fact that it gives firms the freedom to prepare their own financial
reports. However, in relation to the new framework, there is a clear guideline on whom, when
or where the changes will be applied in providing financial information (Christensen, 2011).
Since the new Framework definition of an entity is deferring from that of the Australian
accounting standards board, the professions in the country are finding it a limitation for them
to apply the framework. In the Australian economy, the framework does not bring out the