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Six (6) advantages of IASB financial reporting conceptual framework.

The following are advantages of IASB financial reporting conceptual framework.

  • The situation is avoided whereby standards are developed on a patchwork basis, where a particular accounting problem is recognized as having emerged, and resources were then channeled into standardizing accounting practice in that area, without regard to whether that particular issue was necessarily the most important issue remaining at that time without standardization
  • A conceptual framework for financial reporting can be defined as an attempt to codify existing generally accepted accounting practice (GAAP) in order to reappraise current accounting standards and to produce new standards
  • As stated above, the development of certain standards (particularly national standards) have been subject to considerable political interference from interested parties. Where there is a conflict of interest between user groups on which policies to choose, policies deriving from a conceptual framework will be less open to criticism that the standard-setter buckled to external pressure
  • Standards are more likely to be developed based on conceptual merit rather than on the basis of economic consequence.
  • It is likely that global adoption of IFRS would be higher due to higher quality and more consistent standards.
  • It makes it easy to highlight anomalies and inconsistencies in standard setting
  • It prevent arguments over the same conceptual points recurring as each standard is being developed.

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