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Explain the role of a conceptual framework in the development of financial
reporting standards?
Conceptual framework plays an important role in the development of accounting standards. A conceptual framework forms a theoretical basis for determining how transactions should be measured and reported – how they are presented or communicated to users. They provide users and preparers of financial statements an understanding of accounting practices and standards based on a common ideology.
Some benefits of a conceptual framework for financial reporting include:
Without a conceptual framework, accounting standards would be developed in a random, haphazard way to deal with issues as they arise. As a result, these standards would be inconsistent with each other or legislation.