Analysis of Revised Conceptual Framework - ACC301 Report

This report analyzes the revised conceptual framework finalized by the International Accounting Standards Board (IASB). It begins by defining the conceptual framework and its benefits, particularly for setting accounting standards and resolving reporting issues, while also acknowledging criticisms regarding its complexity and potential conflicts. The report then explores the objectives of general-purpose financial reporting, emphasizing the importance of providing information for assessing management stewardship and reintroducing the concept of prudence. The concept of prudence, also known as conservatism, is explained. Furthermore, it examines the principle of substance over form, which prioritizes the economic reality of transactions over their legal form in financial statements. The report concludes by referencing the provided sources.

Conceptual Framework
The conceptual framework or the statement of concepts
refers to the body of interrelated fundamentals and
objectives. The objectives help in the identification of
the goals and need for financial reporting and the basic
concepts are the concepts, which help in the
achievement of those objectives. Such concepts provide
assistance in the selection of the transactions, events
and the circumstances to account, how can they be
summarised as well as reported (ifrs.Org. 2019).

Benefits from a Conceptual Framework
The benefits of the Conceptual Framework are that, it
provides the Financial Accounting Standards Boards
with the foundation for the setting of standards and
the concepts to use as techniques for the resolving of
the accounting and reporting questions. Further more
it gives a basic answering on which to take into
consideration the benefits of the alternative solutions
to the complex financial accounting on the reporting
of the problems.

Criticisms to the Current Accounting Framework
The Conceptual Framework has been surrounded by certain
limitations. The primary criticism that it has been going through is
difficulty in its establishment. It is a very time consuming and an
expensive framework, which is not possible for the firms to use.
Further more, the conflict that may arise among the framework
and the various standards of accounting.

Objectives of General purpose Financial Reporting
 The General Purpose Financial Reporting aims towards giving more prominence
within the thought of the aims and objective of financial reporting to the
significance of giving information that is needed to find out the management
stewardship of the entity’s resources (Ifrs.org. 2019).
 It further aims towards the reintroduction of an explicit reference to notion of
the prudence (describe3d in the next question), which is explained as a caution
when making of judgements under condition of uncertainty, and stating the
prudence is quite significant for the achievement of neutrality (Macve, R.,
2015).

Prudence
The prudence concept in Accounting, which is
also known as the conservatism principle, is the
key principle of accounting.

Advantages of Prudence
 The prudence principle is a principle that is
followed worldwide. It provides the base to the
organisations on which they can build the financial
statements according to the principle.
 It makes sure that financial statements present the
realistic and fair view of the organisation’s
liabilities and the revenues.

Substance over form
The Substance over form is a concept of accounting, where the
substance of transaction and events that is to be recorded in the
financial statements apart from their legal aspect for the purpose of
presentation of a true and fair positions of the affairs of the
company. The concept of Substance over form details the use of
inference on the part of the authorities that prepare the financial
statements. It is for the purpose if deriving the sense of business
from the transactions and the circumstances, which are of great
significance, they may not be regarded at times for relevant yet
useful information to the authorities who use financial statements.

References
 Ifrs.org. (2019). [online] Available at:
https://www.ifrs.org/-/media/project/conceptual-framework/exposure-draft/
published-documents/ed-conceptual-framework-basis-conclusions.pdf [Accessed
5 Aug. 2019].
 Ifrs.org. (2019). [online] Available at:
https://www.ifrs.org/-/media/project/conceptual-framework/current-stage/
conceptual-framework-summary-of-tentative-decisions.pdf [Accessed 5 Aug.
2019].
 Macve, R., 2015. A Conceptual Framework for Financial Accounting and
Reporting: Vision, Tool, Or Threat?. Routledge.
 Flower, J. and Ebbers, G., 2018. Global financial reporting. Macmillan
International Higher Education.

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