What is a conceptual framework for financial reporting?

Asked By: Nevadita Casasempere | Last Updated: 25th January, 2020
Category: business and finance business administration
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The Conceptual Framework for the Financial Reporting (let's title it just “Framework”) is a basic document that sets objectives and the concepts for general purpose financial reporting. Its predecessor, Framework for the preparation and presentation of the financial statements was issued back in 1989.

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Keeping this in consideration, what is meant by conceptual framework for financial reporting?

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.

Additionally, what is meant by a conceptual framework? A conceptual framework is an analytical tool with several variations and contexts. It is used to make conceptual distinctions and organize ideas. Strong conceptual frameworks capture something real and do this in a way that is easy to remember and apply.

Similarly, you may ask, what are the components of the conceptual framework for financial reporting?

Answer: The components of the conceptual framework for financial reporting include recognition and measurement concepts—the economic entity, going concern, monetary unit, and periodicity assumptions; the historical cost, revenue recognition, matching, and full disclosure principles; and the cost-benefit, materiality,

What is regulatory framework for financial reporting?

A regulatory framework for the preparation of financial statements is necessary for a number of reasons: To ensure that the needs of the users of financial statements are met with at least a basic minimum of information. To regulate the behaviour of companies and directors towards their investors.

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What are the elements of conceptual framework?

Conceptual Framework Phase B — Elements and recognition
  • the various elements of financial statements – assets, liabilities, equity, revenues and expenses.
  • the recognition requirements for each element.

What are the components of conceptual framework?

The Framework addresses:
  • the objective of general purpose financial reporting.
  • qualitative characteristics of useful financial information.
  • financial statements and the reporting entity.
  • the elements of financial statements.
  • recognition and derecognition.
  • measurement.
  • presentation and disclosure.

What is the purpose of conceptual framework?

A conceptual framework is a description or depiction of any given system that illustrates the key relationships between the elements of that system. Their purpose is, generally speaking, to facilitate an understanding of a network of ideas in accessible terms.

What is the importance of conceptual framework?

Conceptual Framework plays an important role in accounting. It is because, Conceptual Framework helps a better understanding of accounting information, for example general purpose financial reports and, in turn, their confidence in IFIs.

What are the disadvantages of conceptual framework?

Limitations of Conceptual Framework
  • First, it is very difficult to set up.
  • Secondly, CFs while providing the standard for accounting practices may lead to rigidity.
  • Thirdly, conflict may arise between CF and the accounting standards followed prior to the introduction of Conceptual Framework.

What is the difference between a conceptual framework and accounting standards?

The conceptual framework is an articulate system of interconnected objectives and essentials that can lead to constant standards which would describe financial accounting and financial statements. The Accounting standards, on the other hand, are the ways that you follow while preparing accounts.

What is the main objective of financial reporting?

According to International Accounting Standard Board (IASB), the objective of financial reporting is “to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.”

Why do we need a regulatory framework?

The need for regulation
A regulatory framework for the preparation of financial statements is necessary for a number of reasons: To increase users' confidence in the financial reporting process. To regulate the behaviour of companies and directors towards their investors.

What is IFRS framework?

IFRS is the international accounting framework within which to properly organize and report financial information. It is derived from the pronouncements of the London-based International Accounting Standards Board (IASB). It is currently the required accounting framework in more than 120 countries.

What are the elements of a financial statement?

The five elements of the major financial statements are assets, liabilities, equity, revenues and expenses.

What is the IASB framework?

The International Accounting Standards Board (IASB) issued its 'Framework for the Preparation and Presentation of Financial Statements' in 1989. This is referred to as its conceptual framework. The framework sets out the concepts that shape the preparation and presentation of financial statements for external users.

What are the three primary objectives of financial accounting information?

In a practical sense, the main objective of financial accounting is to accurately prepare an organization's financial accounts for a specific period, otherwise known as financial statements. The three primary financial statements are the income statement, the balance sheet, and the statement of cash flows.

What is conceptual framework example?

A conceptual framework is used to illustrate what you expect to find through your research, including how the variables you are considering might relate to each other. You should construct one before you actually begin your investigation.

What is an example of a conceptual model?

A conceptual model is a representation of a system, made of the composition of concepts which are used to help people know, understand, or simulate a subject the model represents. Some models are physical objects; for example, a toy model which may be assembled, and may be made to work like the object it represents.

How do you develop a conceptual framework?

The key steps for the development of the conceptual framework are:
  1. Identify the key variables used in the subject area of the study.
  2. Draw out key variables within something you have already written about the subject area i.e. literature review.
  3. Perennial to the aim, segregate them as dependent and independent variables.

What is the meaning of conceptual framework in research?

Definition of Conceptual Framework
In other words, the conceptual framework is the researcher's understanding of how the particular variables in his study connect with each other. Thus, it identifies the variables required in the research investigation.

What is the difference between a theoretical framework and a conceptual framework?

Though the terms might have been used interchangeably, in fact, they refer to different things. Theoretical framework in a study is based on an existing theory or theories (e.g., a theory of motivation). The conceptual framework, on the other hand, is something you can develop yourself based on this theory.