Development of Accounting Conceptual Framework and Changes Issued by AASB

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................3
1. Development of the Accounting Conceptual Framework.......................................................3
2. Specific changes and development between Conceptual framework issued by AASB..........3
3. Future directions and insights in development of Conceptual Framework.............................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
INTRODUCTION
In his report a brief description of the history of the development of the Accounting
Conceptual Framework is provided. Also, specific changes and development of the conceptual

framework issued by the AASB is discussed. Further insights about the future direction and
development of conceptual framework is presented in this report.
MAIN BODY
1. Development of the Accounting Conceptual Framework
The Accounting framework is set by the Financial Accounting Standard Board (FASB).
The conceptual framework was presented in a sequence of 7 statements that consists of concepts
related to financial accounting in the late 1978. Later in 1989, the International Accounting
Standard Committee (IASC) developed a framework of the financial statements. The framework
provided by both the FASB and IASC were proved to be inconsistent and unclear (Huber, 2017).
In 2002, under the Norwalk agreement both the authorities jointly develops the accounting
standards and conceptual framework that was said to be more clear and consistent. This joint
project was then inserted in the both FASB and IASB agendas in 2004. It had been observed that
a general conceptual framework is needed as to tackle the accounting issues and would likely to
be help in development of standards which are based on accounting principles. Later in 2010, a
combined chapters were presented that deals with the financial reporting and to maintain quality
of the financial information. To provide integrity the fundamental characteristics to maintain
quality information is re-instated. However the ‘reliability’ is changed with ‘faithfulness’ and
‘relevance’ was unchanged. In the end of year 2010 the joint collaboration of FASB and IASB
got suspended. In 2012 IASB and in 2014, FASB restarted the accounting conceptual framework
project (Handley and et.al, 2020). The Board put focus on the presentation of the financial
reporting which would help the investors and stakeholders to determine the financial
performance. For this purpose the FASB presented a draft of the financial reporting framework
which was issued in 2016. Then in 2018 the IASB, with the revise International Financial
Reporting Standards (IRFS) issued Conceptual framework for accounting. The revise framework
consists of the objectives used for financial reporting, definition of asset, liability, income,
expenses and equity, concepts related to disclosure and maintenance of the capital. For the
companies that are uses conceptual framework for the purpose to create financial policies the
revised conceptual framework by IASB got effected on 2020.