Question

Questions 1. How do conceptual frameworks of accounting attempt to create a theory of accounting? Describe the components of the IASB Framework and how it contributes to a theory of accounting. 2. Some people argue that there is no need for a general theory of accounting as established in a conceptual framework. They say there is no overall theory of physics. biology, botany or psychology, so there is no need for an overall theory of accounting. Furthermore, attempts to develop such a theory are futile and unnecessary, since accounting has not needed a conceptual framework so far. Debate this view. 3. What does the IASB Framework describe as the basic objective of accounting? What are its implications? 123 CHAPTER 4 A conceptual framework

Answer 1

1)Answer: Conceptual frameworks do not employ the term 'theory' because of the difficulty of demonstrating logical consistency and in gathering factual evidence to support the theory. However, by following a structured program of inter-related concepts, accounting regulators use the conceptual framework to achieve consistent accounting standards that will replace ad hoc solutions to specific problems. In this context , the components of the conceptual framework can be viewed as the building blocks of a theory of accounting . The components of the IASB /Australian Framework are: objectives of financial statements; qualitative characteristics of financial information; definitions of the basic elements of accounting reports and principles and rules of recognition and measurement of the basic elements, and the nature of the information to be displayed in financial reports.