Question

Users of financial statements can face different questions about the recognition and measurement of financial items. To help develop the type of financial information that can be used to answer these questions financial accounting and reporting rules on a conceptual framework.

Instructions

1.   What are the basic components of the conceptual framework?

2.   What are your views about the success of the conceptual framework?

Answer 1

(1).

Following are the basic components of conceptual framework;

1. Objectives

2. Qualitative characteristics

3. Elements

4. Operational guidelines (recognition and measurement concepts);

·        Basic assumptions

·        Accounting principles

·        Constraints

(2).

Success of any basic accounting framework depend upon the easiness in applicability and more acceptability. Hence we can say that success of the conceptual framework will depend on the level of overall acceptability, it means how easily these accounting framework are applicable in actual financial statement prepartion, will decide about the success or failure of these accounting framework.

Apart from this if following results are attained due to conceptual framework then we can say that these will be successful;

·        If Apex accounting body issues more useful and reliable standards in the the stipulated time period.

·        If real & actual problems are solved more rapidly & effectively.

·        If various stakeholders trust in the financial reporting system based on conceptual framework.

·        If it helps in more comparability in the financial statements of the companies across the world etc.