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Chapter 2: Question 4IFRS (page 73)

What are some of the challenges to the IASB in developing a conceptual framework?

Short Answer

Expert verified

Some of the challenges faced by the International Accounting Standards Board (IASB) in developing a conceptual framework include:

  • Work is being accomplished on the framework as a whole; the work cannot be issued unless it’s complete.
  • There is the presence of uncertainty and difference in opinion in the context of treatment and disclosure issues on an element of the framework.

Step by step solution

01

Meaning of Conceptual Framework

A conceptual framework is a collection of fundamentals as well as objectives formulated by the International Accounting Standards Board (IASB) to establish conformity in interpretation across different accounting procedures.

02

Some of the challenges faced by IASB in developing a conceptual framework

The International Accounting Standards Framework (IASB) helps IASB in advancing future International Financial Reporting Standards (IFRS) and in evaluating the existing International Accounting Standards (IAS). However, there are also some difficulties faced by International Accounting Standards Board (IASB). Which include:

  • Thorough research is needed, and agreement of all the industry members to the treatment or system for functioning of a conceptual framework is required.
  • The framework will not entertain the post dilemma issues and the disclosure needs.
  • While drafting the framework, a thorough inspection is needed, and the result of the issues on the industry as a whole, as well as invariability of accounts with the International Generally Accepted Accounting Principles (IGAAP).

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Most popular questions from this chapter

(Elements of Financial Statements) Ten interrelated elements that are most directly related to measuring the performance and financial status of an enterprise are provided below.

Assets Distributions to owners Expenses Liabilities Comprehensive Income Gains Equity Revenues Losses Investments by owners

Instructions

Identify the element or elements associated with the 12 items below.(a) Arises from peripheral or incidental transactions.

(b) Obligation to transfer resources arising from a past transaction.

(c) Increases ownership interest.

(d) Declares and pays cash dividends to owners.

(e) Increases in net assets in a period from nonowner sources.

(f) Items characterized by service potential or future economic benefit.

(g) Equals increase in assets less liabilities during the year, after adding distributions to owners and subtracting investments by owners.

(h) Arises from income statement activities that constitute the entity’s ongoing major or central operations.

(i) Residual interest in the assets of the enterprise after deducting its liabilities.

(j) Increases assets during a period through sale of product.

(k) Decreases assets during the period by purchasing the company’s own stock.(l) Includes all changes in equity during the period, except those resulting from investments by owners and distributions to owners.

E2-2 (L01,2,3) (Usefulness, Objective of Financial Reporting, Qualitative Characteristics) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.

  1. The fundamental qualitative characteristics that make accounting information useful are relevance and verifiability.
  2. Relevant information only has predictive value, confirmatory value, or both.
  3. (c)Information that is a faithful representation is characterized as having predictive or confirmatory value.
  4. Comparability pertains only to the reporting of information in a similar manner for different companies.
  5. Verifiability is solely an enhancing characteristic for faithful representation.
  6. In preparing financial reports, it is assumed that users of the reports have reasonable knowledge of business and economic activities.

What is a conceptual framework? Why is a conceptual framework necessary in financial accounting?

Question: What are some of the costs of providing accounting information? What are some of the benefits of accounting information? Describe the cost-benefit factors that should be considered when new accounting standards are being proposed.

(Usefulness, Objective of Financial Reporting) Indicate whether the following statements about the conceptual framework are true or false. If false, provide a brief explanation supporting your position.

  1. Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements.
  2. General-purpose financial reports are most useful to company insiders in making strategic business decisions.
  3. Accounting standards based on individual conceptual frameworks generally will result in consistent and comparable accounting reports.
  4. Capital providers are the only users who benefit from general-purpose financial reporting.
  5. Accounting reports should be developed so that the users without knowledge of economics and business can become informed about the financial results of a company.
  6. The objective of financial reporting is the foundation from which the other aspects of the framework logically result.
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