Question

4-3 Is the 2018 IASB Framework useful in its present form? 4-4 Accounting standards and regulations should aim to state how all situations should be dealt with. Discuss. 4-5 If you were to develop an accounting conceptual framework from scratch, where would you start and how would you structure it?

Answer 1

4-3.

The Framework's purpose is to assist the IASB in developing and revising IFRSs that are based on consistent concepts, to help preparers to develop consistent accounting policies for areas that are not covered by a standard or where there is choice of accounting policy, and to assist all parties to understand and interpret IFRS.

In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework. This elevation of the importance of the Framework was added in the 2003 revisions to IAS 8.

The Framework is not a Standard and does not override any specific IFRS.

If the IASB decides to issue a new or revised pronouncement that is in conflict with the Framework, the IASB must highlight the fact and explain the reasons for the departure in the basis for conclusions.

4-4

An accounting standard is a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. Accounting standards improve the transparency of financial reporting in all countries. In the United States, the Generally Accepted Accounting Principles form the set of accounting standards widely accepted for preparing financial statements. International companies follow the International Financial Reporting Standards, which are set by the International Accounting Standards Board and serve as the guideline for non-U.S. GAAP companies reporting financial statements.

U.S. GAAP Accounting Standards

The American Institute of Certified Public Accountants developed, managed and enacted the first set of accounting standards. In 1973, these responsibilities were given to the newly created Financial Accounting Standards Board. The Securities and Exchange Commission requires all listed companies to adhere to U.S. GAAP accounting standards in the preparation of their financial statements to be listed on a U.S. securities exchange. Accounting standards ensure the financial statements from multiple companies are comparable. Because all entities follow the same rules, accounting standards make the financial statements credible and allow for more economic decisions based on accurate and consistent information.

Financial Accounting Standards Board (FASB)

An independent nonprofit organization, the Financial Accounting Standards Board (FASB) has the authority to establish and interpret generally accepted accounting principles (GAAP) in the United States for public and private companies and nonprofit organizations. GAAP refers to a set of standards for how companies, nonprofits, and governments should prepare and present their financial statements.

International Financial Reporting Standards Accounting Standards

Generally Accepted Accounting Principles are heavily used among public and private entities in the United States. The rest of the world primarily uses IFRS. Multinational entities are required to use these standards. The IASB establishes and interprets the international communities' accounting standards when preparing financial statements.

4-5

we would take care on the following things

• the objective of general purpose financial reporting;
• the qualitative characteristics of useful financial information;
• a description of the reporting entity and its boundary;
• definitions of an asset, a liability, equity, income and expenses and guidance supporting these definitions;
• criteria for including assets and liabilities in financial statements (recognition) and guidance on when to remove them (derecognition);
• measurement bases and guidance on when to use them;
• concepts and guidance on presentation and disclosure; and
• concepts relating to capital and capital maintenance.