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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

What are the five steps used to determine the proper time to recognize revenue?

Which of the following statements about the IASB and FASB conceptual frameworks is not correct?

(a) The IASB conceptual framework does not identify the element comprehensive income.

(b) The existing IASB and FASB conceptual frameworks are organized in similar ways.

(c) The FASB and IASB agree that the objective of financial reporting is to provide useful information to investors and creditors.

(d) IFRS does not allow use of fair value as a measurement basis.

In January 2018, Jane way Inc. doubled the amount of its outstanding stock by selling on the market an additional 10,000 shares to finance an expansion of the business. You propose that this information be shown by a footnote on the balance sheet as of December 31, 2017. The president objects, claiming that this sale took place after December 31, 2017, and therefore should not be shown. Explain your position.

The Financial Accounting Standards Board (FASB) has developed a conceptual framework for financial accounting and reporting. The FASB has issued eight Statements of Financial Accounting Concepts. These statements are intended to set forth the objective and fundamentals that will be the basis for developing financial accounting and reporting standards. The objective identifies the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties.

The purpose of the statement on qualitative characteristics is to examine the characteristics that make accounting information useful. These characteristics or qualities of information are the ingredients that make information useful and the qualities to be sought when accounting choices are made.

Instructions

(a) Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual framework.

(b) What is the most important quality for accounting information as identified in the conceptual framework? Explain why it is the most important.

(c) Statement of Financial Accounting Concepts No.8 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.

Explain the revenue recognition principle.
See all solutions

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