Conceptual Framework

IASB framework for the preparation and presentation of financial statements

 What is conceptual framework?
A framework that the accounting standard of the IFRS are built on. (The concepts that
come together to make up accounting)
There have been changes to the framework over time. The recent change was in 2018 that we are
currently using. The structure that pins the standard.
The conceptual framework falls under the Normative or prescriptive theories.

 Normative theory (how to do things) of accounting with a decision-usefulness

perspective or goal-oriented perspective to the framework.

It Provides a view:

1. General purpose financial reporting –to provide useful information for economic-
based decision

2. Financial information –qualitative characteristics of good financial information

(N.B when preparing the financial statements, it should not just be numbers, it should
have a qualitative feature.)
3. Elements of accounting –defines assets, liabilities, income, expenses & equity (and
prescribe recognition for criteria for each of the elements. A definition of what each
element is, and also rules on how and when to recognize them e.g. Revenue (point of
Sales, buy and hold)
Normative theory is how we should to the accounting. The CF is the foundation of the
framework or standard. It is not a standard itself.
Back in the days, people would record transactions in their own way. So, they decided to
structure it and become the formation of the standards (which were long before the framework).

The purpose of the Conceptual Framework is to:

(a) assist the IASB or other standard-setting bodies to develop Standards that are based on
consistent concepts.
(b) assist preparers to develop consistent accounting policies when no Standard applies to a
particular transaction or event; and (when there is no standard for a particular event, there is
some principle to follow)
(c) assist all parties to understand and interpret the Standards.