Question

Explain the differences between a conceptual framework and accounting standards.use example to justify your answer.

Answer 1

ANSWER:

Conceptual framework for financial reporting   Accounting Standards for financial reporing

A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent set of rules and standards. Specifically in accounting, the rule and standards set the the nature, function and limits of financial accounting and financial statements.   These are the Standards for Financial Report issued by Concerned Governing authorities. Accounting Standards lay norms for accounting for Specific transactions for example: Effects of Changes in Foreign exchange rates, Revenue from Customers Contracts, Accounting for Provisions, Reserves and Contifent Liabilities etc.
a. Provides a general guide on how financial statements should be prepared.
b. Sets up principles which are general concepts.
C. Applicable to a wide range of issues.
d. Not an accounting Standard. When thee is a conflict between conceptual framework and accounting standards then accounting standard will prevail over the conceptual framework.
e. Overall purpose is to make reasearch findings meaningful and generalizable.   a. Provides guidance on a very specific issue related to financial reporting Eg: How to apply fairvalue measurement, how borrowing costs are accounted for etc.,

b. Apply concepts set out in conceptual framework.
Examples of Accounting Concepts are: Acrual, Produce, Matching Concept, Going Concern etc.   Specific examples of an accounting standard include revenue recognition, asset classification, allowable methods for depreciation, inventory valuation, accounting for borrowing costs etc.,Comment

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