A conceptual framework for financial reporting can be defined as an attempt to codify existing generally accepted accounting practices (GAAP) in order to reappraise current accounting standards and to produce new standards.
The following are disadvantages of IASB financial reporting conceptual framework:
- Financial statements are intended for a variety of users, and it is not certain that a single conceptual framework can be devised which will suit all users.
- Given the diversity of user requirements, there may be a need for a variety of accounting standards, each produced for a different purpose (and with different concepts as a basis).
- It is not clear that a conceptual framework makes the task of preparing and then implementing standards any easier than without a framework
- Many areas of accounting that could benefit from general principles are not covered in the conceptual framework. An example is the recognition of gains or losses through profit or loss or other comprehensive income, which is somehow arbitrary at present.
- The economic consequence of accounting standard may be ignored
- The principles in the framework are by necessity general and subject to interpretation.
- It can be difficult to develop a set of principles that are applicable fairly to every situation.
- Different parts of the world with different economic and cultural norms may need different principles. This may serve to limit the global adoption of IFRS.