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Revision of Conceptual Framework of Accounting: Impact on Financial Reporting

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Added on  2023-06-06

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This report analyzes the changes made by IASB in the conceptual framework of accounting, including the impact on financial reporting parameters, improvements made in the CF, and the need for stewardship in financial reporting.

Revision of Conceptual Framework of Accounting: Impact on Financial Reporting

   Added on 2023-06-06

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Advanced Financial Accounting
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Revision of Conceptual Framework of Accounting: Impact on Financial Reporting_1
Introduction
The revision of the Conceptual Framework (CF) has been undertaken by IASB for
improving the quality of financial information disclosed by the business entities. The revision
aims to address the gaps or potential issues existing in conceptual framework of accounting to
assist the preparers of financial statements in a better way. This report has analyzed and examine
the different changes that have been implemented by the IASB in the conceptual framework.
This includes a detail discussion about the objective of the CF and the significant changes
introduced in measurement basis and definition of elements of financial statements. Also, it
discusses about the need for assessing the stewardship of information for achieving the objective
of financial reporting. Lastly, it examines the arguments for determining the need for revision of
the CF for developing a better basis for setting of accounting standards.
1. Explanation of the Objectives and Purpose of the Conceptual Framework of Accounting
The conceptual framework has been developed by the IASB for underlying the
development and presentation of financial statements. It provides a guiding framework for
developing the accounting principles and methods required for reporting the financial transaction
at the time of preparing the financial reports. Its purpose is stated as follows:
To aid the IASB in developing the financial reporting standards that can be applied
internationally
Aids IASB in promoting harmonization of accounting regulations and standards in
relation to the presentation of financial statements. This is required for developing a
uniform set of accounting rules and reducing the variability present in relation to
accounting treatment of financial items
To aid the national and international accounting bodies in development of the accounting
standards
To provide support and guidance to the developers of financial statements in application
of IFRS (A Review of the Conceptual Framework for Financial Reporting, 2014)
To provide guidance to the auditors in developing an opinion on the materiality and
integrity of the financial statements and examining the extent of their compliance with
IFRS
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Revision of Conceptual Framework of Accounting: Impact on Financial Reporting_2
To provide understandable information to the financial statements users so that it can be
easily interpreted by them
To provide an insight about the approach and formulation of IFRS for giving assistance
to those who are interested in working with IASB (Sutton Cordery and Zijl, 2015)
The objective of the CF can be stated as follows:
To provide useful and relevant financial information to the users about a reporting entity
To disclose the financial information that is capable to aid the users such as investors,
lenders and creditors in making decisions regarding providing resources to an entity
The financial information disclosed should be related to the resources possessed by an
entity, claims that are present against it and the effectiveness of the management of an
entity and its governing bodies in carrying out their responsibilities using an entity
resources (IASB's Conceptual Framework for Financial Reporting, 2018)
2: Impact of the revision of the conceptual framework on the various parameters of the
financial reporting
The revision of conceptual framework has been performed to made specific changes in
criteria provided in measurement, presentation and disclosure, definition of elements of
the financial statements and important of stewardship and prudence in the financial
reporting. In this section there will specific discussion on why IASB has opted to change
the conceptual framework in relation to the following parameters:
Measurement, presentation and disclosure: There have been significant changes made in
the measurement concepts as defined in the conceptual framework. There has been
addition to the measurement concepts in relation to the factors that has to be considered
when there is need to select the measurement basis. Presentation and disclosure is one of
major parameter that defines the quality of financial reporting as it allows the users of the
financial report to read and understand the financial data in easy manner and make
comparison. There have been significant changes in presentation and disclosure chapter
of conceptual framework as this chapter has been amended to add how to classify the
income and expenses in other comprehensive income statement. It has been noted that
previous CF does not provides enough or very little information on the elements of the
financial statements are being measurement to present them in the financial statements.
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Revision of Conceptual Framework of Accounting: Impact on Financial Reporting_3

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