The IASB conceptual framework for financial framework attempt to set out the concepts that underlie the preparation and presentation of financial statements. The most recent version was issued in September 2010.
The following represent some of the core reasons for the development of the conceptual framework;
- To assist the IASB in developing and amending standards. Without a framework such as this, standards have been developed in an ad hoc manner. This has not resulted in top quality standards that are consistent with each other.
- To reduce the number of alternative accounting treatment permitted by IFRS. A feature of older standards has been the development of ‘recommended’ treatment and an ‘allowed alternative’. this may have been for political reasons, such as to avoid conflict with national laws, or to encourage acceptance of the standards by wider constituency. However it leads to weaker standards and inconsistency in application.
- To assist other standard setters in developing standards. Not all national standard setters have the resources or expertise to ensure theoretically sound standards. The existence of generally accepted high quality framework provides support to these and similar bodies.
- To provide guidance to preparers and auditors in applying and assessing application of IFRS, especially in ‘grey’ areas where the guidance in IFRS is absent or ambiguous.
- To assist users of financial statements interpret information presented