Question

Is the 2018 IASB Framework useful in its present form?

Accounting standards and regulations should aim to state how all situations should be dealt with. Discuss.

If you were to develop an accounting conceptual framework from scratch, where would you start and how would you structure it?

Answer 1

Is the 2018 IASB Framework useful in its present form?

Answer:

Scope for debate here, of course. Briefly, major points would seem to be the following.

It provides consistent definitions and relevant considerations, which can help provide consistent and related approaches in particular standards.

It is out of date and does not adequately reflect current thinking.

It suggests outcomes which do not always seem intuitively sensible or useful (and are not always followed in Standards, for example a deferred government grant is not a liability, but this is allowed by the relevant Standard at the time of writing). It could be improved by updating and developing certain issues, notably the concept of fair value, which essentially post-dates 1989 and, further, is not treated consistently across recent Standards. Whether the way in which revenues and expenses are defined in a manner secondary to the definitions of balance sheet items, rather than the other way round, remains a debatable point.

Accounting standards and regulations should aim to state how all situations should be dealt with. Discuss.

Answer:

This relates to the so-called cookbook approach. IASB Standards claim to be principles based, rather than seeking to cover all eventualities, although this claim is not always justified. The collapse of Enron has given a boost to the idea of principles-based regulations, even in the USA. However, fundamental traditions and attitudes to law, life and regulation are involved here.