Question

QUESTION 1 In 2018, both FASB and IASB published a new version of their conceptual framework, this step can be considered as a major step forward. 1. Identify the components (the levels) of the conceptual framework [4 Marks] 2- Discuss similarities and differences between these two conceptual frameworks [6 Marks] [Total 5 Marks)

Answer 1

The objective of financial reporting is the foundation of the conceptual framework.

The basic components of a conceptual framework include the general purpose of financial reporting and the qualitative characteristics of accounting.

Accounting standards are set forth by organizations such as the FASB and IASB . These groups produce standards which are a common language for accounts on procedures such as GAAP & IFRS

The FASB has been charged with developing a conceptual framework of accounting theory and with establishing standards for financial accounting practice. It divides the conceptual framework activities into several projects.

FASB Statement of Financial Accounting deals with the objectives of financial reporting. These objectives relate to the general purpose financial reporting of companies. That is they are to meet the needs of a variety of external rather than internal users.

The IASB Framework states that the objective of financial statements is to present information that is useful in making economic decisions . The framework has two assumptions that a company is a going concern and that it uses accrual accounting . The framework identifies four qualitative characteristics of financial statements namely understandability , relevance, reliability and comparability. It identifies three constraints such as time lines, balance between benefit and cost and balance between the qualitative characteristics. The IASB Framework identifies the elements (e.g, assets, income) of the financial statements and also discuss conceptual issues related to recognition and measurement of these elements. The Framework is designed to help the IASB develop international accounting standrads.