Question

Refer to the following issues regarding the conceptual framework and answer the questions below.
It is frequently heard that the conceptual framework would lead to more uniform practice and fewer choices. However, there have been arguments that favour and oppose greater uniformity in accounting practices within a country as well as internationally.

Required: With proper reference and citation, complete the following:
a) Identify and discuss the benefits that can be expected to be derived from the conceptual framework by addressing the relevant comments or dilemmas discussed above.

Answer 1

A)

The Conceptual Framework (For " Concepts Statements ") is a body of interrelated objectives and fundamentals. The objectives identify the goals and purposes of financial statements and the fundamentals are the underlying concepts that help achieve  those objectives. Those concepts provide guidance in selecting transactions, events and cirumstances to be accounted for, how they should be reognized and measured, and how they should be summarized and reported.

ADVANTAGES OF CONCEPTUAL FRAMEWORK:

a) The situation is avoided whereby standards are developed on a patchwork basis, where a particular accounting problem is recognized as having emerged, and resources were then channeled into standardization.

b) As stated above, the development of certain standards (particularly national standards) have been subject to considerable political interference from interested parties. Where there is a conflict of interest between user groups on which politics to choose, politics deriving from a conceptual framework will be less open to critisicm that the standards setter buckled to external pressure.

c) Some standards may concentrate on the income statement whereas some may concentrate on the valuation of net assets (statement of fianancial position).