1. Explain why principles-based standards require a conceptual framework.

As a principles-based set of standards, IFRS requires a sound, comprehensive and consistent framework
that comprises essential fundamental concepts to enable the users to exercise their professional
judgement.

“Without the guidance provided by an agreed-upon framework, standard setting ends up being based
on the individual concepts developed by each member of the standard-setting body.” (Par 2, Revisiting
the conceptual framework). Without an internally consistent framework, it is undeniable that a
standard-setting process that solely based on personal individual standard setters will create
inconsistency and inevitable conflict on similar issues. Furthermore, the inconsistency between the past
decisions will also contribute to minimal indication to future decisions.

Preparers of financial statements, auditors and users who applied IFRSs will also require a consistent
and well-developed conceptual framework to either aid in the preparation of understanding,
interpretation of the financial statements.

Hence, a conceptual framework is definitely a necessity for principles-based standards.