Why a framework is needed

 to ensure the achievement of relevant and

reliable financial reporting in order to meet the
needs of users.

 full regulation of financial statement

preparation cannot be achieved by accounting
standards alone. Additional control is required in
the form of legal and market regulations
Principles-based v rules-based
accounting
 Principles-based accounting
 follows a conceptual framework, such as the
Board’s Framework
 accounting standards are created based on
the conceptual framework
 Rules-based accounting

 accounting standards are a set of rules to be

followed
 often described as a ‘cookbook’ approach
The purpose of the framework
The conceptual framework published by the Board is called the
Conceptual Framework for Financial Reporting. It includes guidance
with
regard to
 the objective of financial reporting
 the qualitative characteristics of financial information
 the definition, recognition and measurement of the elements of
financial statements
 concepts of capital and capital maintenance.
The purpose of the Framework is to:
 assist the International Accounting Standards Board to develop
IFRS Standards that are based on consistent concepts
 assist preparers to develop consistent accounting policies when no
Standard applies to a particular transaction or other event, or when
a Standard allows a choice of accounting policy
 assist all parties to understand and interpret the Standards.
Objective of financial reporting
The objective of financial reporting is to provide financial
information about the
reporting entity that is useful to existing and potential investors,
lenders and
other creditors in making decisions about providing resources to the
entity