Question

What force of law does the conceptual framework have?

Answer 1

Conceptual frameworks, in general, organize the premises and concepts that underlie corporate accounting, particularly financial accounting. An accounting conceptual framework can be described as: a coherent system of concepts that underlie financial reporting. However, this Conceptual Framework does not immediately propose developing or amending individual and specific accounting standards. Rather, its role is to provide basic guidelines. The conceptual framework is comparatively broad term representing context of the concept that the study is based on - explaining how and in what sense these terms have been used in this particular study. The conceptual framework provides high level concepts such as definitions of elements of financial   statements,   qualitative   characteristics,   definition   of   the   objective   of   general purpose financial reporting.

The   Conceptual Framework provides   definitions   of   basic   elements   to   be included in the statement of financial position such as:

(a) An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Under S. 227 of ASIC Act include:

1) Developing a conceptual framework

2) Making accounting Standards that have force of law under S. 334 of the Corporations Act.

3) Formulate accounting Standards for other purposes;

(i) For Entities not governed by the Corporations Law.

4) Participate in and contribute the development of a single set of accounting standards for worldwise uses.

This Conceptual Framework builds on premises and concepts underlying existing accounting standards and reflects current constraints surrounding financial reporting. Constraints include market practices, investors' ability to analyze information, the current legal system and basic ideas underlying such system, and social value judgments regarding the economic impact of standard setting.