UBAF 3023 – Corporate Reporting and Current Issues (JAN 2021)

TUTORIAL 3

Conceptual framework for financial reporting and changes in financial reporting

measurement basis (Based on lecture 2)

Resources for answering tutorial questions:

 MASB website: The Conceptual Framework for Financial Reporting
http://www.masb.org.my/images/Conceptual_framework.pdf
 IAS plus website: CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING 2010
http://www.iasplus.com/standard/framewk.htm
 IASB official website: http://www.ifrs.org
 Introduction chapter, MFRS 13, Ng E. J. (2012). Financial Reporting Standards for Malaysia. CCH
Asia Pte Ltd: Kuala Lumpur or; Chapter 1& 2 Tan L.T. 2012 Financial Accounting & Reporting In
Malaysia, Vol I, CCH Asia Pte Ltd

Articles
 Historical Cost versus Current Cost Accounting, Accountants Today, January 2007
 Let’s be fair, Accountants Today, August 2007
 Articles: Refer to articles to be posted on WBLE on ongoing basis

Tutorial 3- Question 1
The main role of the International Accounting Standards Board (IASB) is to devise and publish
International Financial Reporting Standards (IFRSs) and revised versions of International
Accounting Standards (IASs). IASs were originally published by the IASB's predecessor body,
the International Accounting Standards Committee (IASC).

The IASB has also published a Conceptual Framework for Financial Reporting' Some of the text
of this document has been transferred from the Framework for the Preparation and Presentation
of Financial Statements published by the IASC in 1989 and adopted by the IASB in 2001 . This
document is not an accounting standard.

Required:
(a) Explain the main purposes of the Conceptual Framework document.
(b) Identify the objective of general purpose financial reporting, as stated in the Conceptual
Framework.
(c) Identify the primary users of general purpose financial reports and four further user groups.
In each case, explain what information each user group would be seeking from the financial
reports.
(d) Identify and explain the assumption which (according to the Conceptual Framework)
underlies the preparation of financial statements.
(e) Identify and explain the qualitative characteristics that make financial information useful.
(f) Explain why it is not always possible to produce financial statements which possess all of the
qualitative characteristics discussed in (e) above.
Tutorial 3 - Question 2
Read the following quote from the FASB and IASB (2005, p. 5) and evaluate the view that
'reliability should be the dominant characteristic of financial statement measures'.

Some FASB and IASB constituents have questioned some of the trade-offs between relevance
and reliability that the Boards have made in setting particular accounting standards. For example,
those constituents have questioned the appropriateness of trade-offs made in requiring financial
statement measures that reflect fair values rather than historical costs. Their underlying
presumption seems to be that historical costs, although arguably not as relevant as fair values, are
more reliable. In those instances, those constituents assert that the trade-off between relevance
and reliability should favour historical costs rather than fair values or, more generally, that
reliability should be the dominant characteristic of financial statement measures.

Tutorial 3 - Question 3
What benefits and disadvantages have been advanced by standard-setters to support the
development of conceptual framework projects? Critically examine whether the benefits
provided in the above statements are likely to flow from the development of a conceptual
framework for accounting.