TOPIC 4: CONCEPTUAL FRAMEWORK
REVISED CONCEPTUAL FRAMEWORK
TheConceptual Framework for Financial
Reportingis a complete, comprehensive and
single document promulgated by
theInternational Accounting Standards
Board. It is a summary of terms and concepts
that underlie the preparation and presentation of
financial statements forexternal users. In other
words, the Conceptual Framework describes the
concepts forgeneral purpose financial reporting.
The Conceptual Framework is an attempt to
provide an overall theoretical foundation for
accounting. It is intended to guide standard
setters, preparers and users of financial
information in the preparation and presentation
of statements. It is the underlying theory for the
development of accounting standards and
revision of previously issued accounting
standards.
The Conceptual Framework will be used in future
standard setting decision but no changes will be
made to the current IFRS.
The Conceptual Framework provides the
foundation for Standards that:
oContribute to transparencyby
enhancing international
comparability and quality of
financial information.
oStrengthen accountabilityby
reducing information gap
between the providers of
capital and the people to
whom they have entrusted
their money.
oContribute to economic
efficiencyby helping investors
to identify opportunities and
risks across the world
ThePURPOSEof the Revised Conceptual
Framework as outlined is to:
To assist the International Accounting
Standards Board to develop IFRS
Standards based on consistent
concepts.
To assist preparers of financial
statements to develop consistent
accounting policy when no Standard
applies to a particular transaction or
other event or where an issue is not
yet addressed by an IFRS.
To assist preparers of financial
statements to develop accounting
policy when a Standard allows a choice
of an accounting policy.
To assist all parties to understand and
interpret the IFRS Standards.
ThisConceptual FrameworkisNOT an IFRS
or PFRS,and hence, does not define standards
for any particular measurement or disclosure
issue.
If there is a standard or interpretation that
specifically applies to a transaction, the standard
or interpretation overrides the Conceptual
Framework.Nothing in the Conceptual
Framework overrides any accounting standard.
Objective of Financial Reporting
The objective of financial reporting forms the
foundation of the Conceptual Framework.
The overall objective of financial reporting is to
providefinancial informationabout the reporting
entity that isusefultoexisting and potential
investors, lenders and other creditors in
makingdecisionsabout providing resources to
the entity.
The objective of financial reporting is the "why",
purpose.orgoal.of accounting.
Specific Objectives of Financial Reporting
The Conceptual Framework places more
emphasis on the importance of providing
information needed to assess the management
stewardship of the entity's economic resources.
Accordingly, the specific objectives of financial
reporting are:
To provide information useful inmaking
decisions about providing resources to the
entity.
To provide information useful in assessing
thecash flow prospects of the entity.
To provide information about
entityresources, claims and changes in
resources and claims.
Limitations of Financial Reporting
General purpose financial reportsdo
not.and cannot provide all of the
information that existing and potential
investors, lenders and other creditors
