IASB Conceptual Framework: Financial Reporting Objectives, Qualitative Characteristics, Elements, Assumptions and Constraints

The assessment titled with the study of “IASB Conceptual Framework” helps to determine the various accounting reports and solutions. The assessment covers the main objectives of financial reporting and other accounting standards. The financial reporting helps different industry and other sectors to check the financial stability and their position. The assessment duly explains the qualitative characteristics that need to be presented in the financial statement. The elements and approaches of the reporting standards are also covered in the topic to understand the concept better. Lastly, the assumption and principle constraints are widely discussed to complete the assessment.

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IASB
Table of Contents
Introduction......................................................................................................................................3
Overview and Conceptual Framework............................................................................................4
Financial Reporting objectives........................................................................................................5
Qualitative Characteristics...............................................................................................................5
Financial Statement Elements..........................................................................................................6
Assumption Principles Constraints..................................................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

IASB
Introduction
The assessment titled with the study of “IASB Conceptual Framework” helps to
determine the various accounting reports and solutions. The assessment covers the main
objectives of financial reporting and other accounting standards. The financial reporting helps
different industry and other sectors to check the financial stability and their position.
The assessment duly explains the qualitative characteristics that need to be presented in
the financial statement. The elements and approaches of the reporting standards are also covered
in the topic to understand the concept better. Lastly, the assumption and principle constraints are
widely discussed to complete the assessment.

IASB
Overview and Conceptual Framework
An independent private-sector body that develops and approves the IFRSs i.e. the
International Financial Reporting Standards (IFRSs) is known to be as the IASB i.e. the
International Accounting Standards Board. The IASB issued the revised conceptual framework
on 29th March 2018. The financial statement is organized, prepared and presented for external
users by many individual entities in the globe. However all the financial statements may look
similar to other countries, these have created many differences related to economic, social and
other legal circumstances. The differences have led many financial statements elements such as
assets, liabilities, income, expenses, and equity. Due to all these circumstances, the financial
statements and other disclosures have been troubled. In this situation, the focus of IASB is to
reduce the difference by integrating regulations, accounting standards, and other procedures in
the presentation of financial statements (Murphy & Connell, 2013). The differences can be
improved by shifting focus on financial statements that are presented and supported to provide
relevant information useful for economic decisions in the country.
Fig.1 Conceptual Framework

IASB
Financial Reporting objectives
The objectives of Financial Reporting are as follows:
1. The main objective is to present the information about the entity, which provides useful
information to various lenders, creditors, investors, bankers and the public in finalizing
and making a decision to facilitate the resources to various entities (Dobler & Knospe,
2016).
2. The financial reporting also helps the customers to know the status and performance of
the company.
3. The report also helps the company that is suffering from the loss to pacify the investor’s
doubts and concerns, it also helps to set the strategic plan for the company with its
reports,
4. Different organization needs to file the report in various sectors such as ROC,
government and other stock market exchanges. The reporting helps to meet the statutory
requirements for those firms (Pelger, 2016).
Qualitative features
The four qualitative features that enhance the financial statements information are as follows:
Understandability: The financial statements must be in a clear and precise format that is easily
understood and readable by the users. It must also provide addition information if required on the
statement.
Relevance: The information set on the financial must be correct and relevant for the users, any
misinformation and calculations affect in economic decisions of the users.
Reliability: The detailed information on financial statements of any organization or a firm
should be free of mistakes and bias. The proper disclosure of the statement should be provided.

IASB
Comparability: The financial statement should be comparable with other accounting periods;
this will enable the users to identify the performance and position of the company (Christensen et
al., 2013).
Financial Statement Elements
The five elements under the IASB framework of financial statements are as follows:
1. Assets: The assets are the first element and reports in the balance sheet, the two types of
assets are current and fixed assets. The current assets are short-term and it is not
depreciated, the fixed assets are those that are used for more than one year and in a large
amount.
2. Liabilities: The two types of liabilities are the current liabilities that settle within 12
months. The other is a non-current liability that settles after more than 12 months.
3. Equity: The equity is the interest made after the deduction of assets and liabilities .
4. Revenue: In simple terms, revenue is the economic benefits generated from the sale of
goods and services.
5. Expenses: The expenses are the spending of a company in the production and other
accounting periods. The expenses can be both operating and administration expenses.
Assumption Principles Constraints
The accounting principles are the building blocks of GAAP. The accounting principles are as
follows:
Historical cost principle: The principles require any company or a firm to record the purchase
of goods and services. The company assets remain on the historical data without any variations
in the market.
Matching principle: All the expenses made by the company should be recorded and match the
revenue while recording the financial statement.
Revenue principle: The principle requires the company to record the revenue earned through
any purchase of goods and services instead when it is collected from other basis (Wang, 2014).

IASB
Consistency principle: The different accounting principles, constraint and assumptions are to be
consistently recorded, and completed over a particular period.
Assumptions and constraints
The key accounting assumptions:
a) Monetary unit assumption: All the financial transactions of a firm or a company should
be recorded on the monetary units; this will help in a proper financial reporting.
b) Periodicity Assumption: The assumption states that the companies should record their
financial statements and other activities within a given period. The time period normally
includes a full year (Chi & Wang, 2014).
Constraints:
Business entity concept: The accounting for the business and the owner of business are to be
recorded separately, as they are two different entities.
Materiality concept: Sometimes the user’s mind or decision might vary about the company
terms and procedures, so all the financial statements should be recorded and noted properly.

IASB
Conclusion
After analyzing the above assessment titled with the conceptual framework of IASB we
can conclude that, the assessment has a definite approach and standards to solve the accounting
and reporting problems. The principle and main objective sets the accounting standards to
function in a more efficient way.
The different elements and characteristics discussed in the topic are of great importance
for Accounting boards and other standards. It helps to identify the main agenda that needs to be
listed in the financial statements of any company or an organization. The principles, assumptions
and constraints are equally important to understand the financial statements concept.

IASB
References
Chi, C. C., & Wang, S. H. (2014). Efficacy and cost-efficacy of biologic therapies for moderate
to severe psoriasis: a meta-analysis and cost-efficacy analysis using the intention-to-treat
principle. BioMed research international, 2014.
Christensen, H.B., Hail, L. and Leuz, C., 2013. Mandatory IFRS reporting and changes in
enforcement. Journal of Accounting and Economics, 56(2-3), pp.147-177.
Dobler, M., & Knospe, O. (2016). Constituents’ Formal Participation in the IASB's Due Process:
New Insights into the Impact of Country and Due Process Document
Characteristics. Journal of Governance and Regulation, 5(3), 50-66.
Murphy, T. and O’Connell, V., 2013. Discourses surrounding the evolution of the IASB/FASB
Conceptual Framework: What they reveal about the “living law” of
accounting. Accounting, Organizations and Society, 38(1), pp.72-91.
Pelger, C. (2016). Practices of standard-setting–An analysis of the IASB's and FASB's process of
identifying the objective of financial reporting. Accounting, Organizations and
Society, 50, 51-73.
Wang, C. (2014). Accounting standards harmonization and financial statement comparability:
Evidence from transnational information transfer. Journal of Accounting Research, 52(4),
955-992.