CONCEPTUAL FRAMEWORK

CHAPTER 4
Muh.Ferial Ferniawan (A031191156)
Muh.Farhan (A031191116)
 ACCOUNTING CONCEPTUAL
FRAMEWORK
A system that shows the relationship between objectives and fundamentals
that are expected to be used in the formation of consistent standards that are
able to explain the meaning, objectives and limitations of accounting and
reporting.
 ROLE OF THE CONCEPTUAL
FRAMEWORK
• A structured theory of accounting
• State the scope and purpose of finance reporting
• Identify and define the qualitative characteristics of financial information
and the basic elements of accounting
• Regarding the principles and rules of recognition and measurement, and
disclosure of reports
 OBJECTIVE OF THE CONCEPTUAL
FRAMEWORK
• SFAC No. 1: Financial reporting is expected to provide useful information for
investors and creditors and other users for making investment, credit and
similar decisions.
• The purpose of the information should be useful for:
1) Economic decisions
2) Predict cash flow prospects
3) Knowing the resources, claims to resources and their changes from a
business entity.
 SFAC NO. 2: QUALITATIVE
CHARACTERISTICS
• Information User: Decision Maker
• Limitations: benefits > sacrifices
• Qualities that decision makers need: Understandable
• The first characteristics that decision makers need: Relevance and Reliability
• The second characteristic that decision makers need: Comparability
• Basis of Recognition: Materiality
 FIRST CHARACTERISTICS A
DECISION MAKER NEEDS:
• Relevance:
1) Time limit
2) Predictability
3) Value feedback
• Reliability
1) Can be verified
2) Shows the truth
3) Neutral
 CONCEPTUAL FRAMEWORK
ACCORDING TO FASB
• • Objectives of Financial Reporting for
• business organizations and non-profit organizations
• • Qualitative characteristics of accounting
information
• • Elements of Financial Statements
• • Recognition and measurement criteria
• • Use of cash flow statements and information
• present value for measurement
• • Definition of the purpose of financial statements
• • Identify the qualitative characteristics that
• provide benefits to information
• accounting
• • Definition of the basic elements of Financial
statements
• along with the concept of recognition and
• measurement.
 JUDGEMENTS NEEDED
• • Relevant
• • Reliable
• • Shows financial position, performance and cash flow of a
business entity
• • Prioritizing substance compared to legal form
• • Neutral
• • complete
 INFORMATION NEEDED

Requirements, guidelines and interpretation

of the same or related conditions

Definitions, recognition criteria and concepts

measurement of assets, liabilities, profits and
burden
 DEVELOPMENT OF CONCEPTUAL
FRAMEWORK
• 1. Standard setting based on principal (principles
based) and rules (rule based)
• 2. Information for decision making and decision
theory approach.
 CRITICS TO CONCEPTUAL
FRAMEWORK
• Approach:
• Scientific
• • The measurement basis of the provisions
• less specific
• • Unclear definition of elements
• Descriptive
• • Accounting cannot be neutral
• • Accounting as a social science discipline does not
• have a clear goal
• • The conceptual framework reflects
 CONCEPTUAL FRAMEWORK FOR
AUDITING STANDARDS
• Auditing is a discipline based on
• on logic.
• • Changes from substantive tests
• be audit risk, client business risk.
• • Focus on the client's internal control audit