Word Count: 994 excluding bibliographies and list of references
Therecommendation of the Dearing report to create a conceptual framework make us wonder what a conceptual framework is for financial accounting and why it is a necessity.
We will see the nature of aconceptual framework through the definitions and its objectives then we will analyse the need of such a framework by considering the existing conceptual frameworks.
AT Foulks Lynch(1998) has defineda conceptual framework as: “a coherent system of inter-related objectives and fundamentals that should lead to consistent standards that prescribe the nature, function and limits of financialaccounting and financial statement”(chapter 2).
A conceptual framework guides the body responsible for establishing accounting standards and ensures that standards are based on fundamental principles; itprovides a frame of reference for resolving accounting questions in the absence of a specific promulgated standard. It also determines bounds for judgment in preparing financial statements; itincreases financial statement user’s understanding of, and confidence in, financial statements and enhances comparability (Elliott & Elliott,2009).
So, as Gore R. and Zimmerman D. wrote: “A conceptualframework can be compared to a constitution for financial reporting, providing the foundation of standards” (p1).
The objectives of a conceptual framework are: to ensure statements are convergentleading to a single set of high level global accounting standards, to identify the users and provide them with the information that is most useful to them, to solve accounting disputes, to define theobjectives of financial statements and to define fundamental principles which then do not have to be repeated in accounting standards.
Recently, there have been several attempts to develop what a... [à continuer]
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