IFRS Conceptual Framework is used as a basis by IASB to prepare accounting standards. Since IFRS are principles based, there will be occasions when users will need to invoke core principles within this framework for maintaining consistency. As newer businesses disrupt markets, accounting standards and core principles need to adapt to such changes. In this era of globalization, it is imperative for accounting professional to remain current. This is the first of three modules to cover key concepts in IFRS, developed at IFRSmentor.com for the benefit of the global accounting community. Feel free to share this content, if you have found it useful. For more key insights and updates, visit: ifrsmentor.com

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IFRS Conceptual Framework
Free IFRS Course
Instructor: Divesh Nair, ACA
June, 2015

2. Conceptual Framework
What’s covered:
• IASB’s Conceptual Framework
• Difference between Principle Based and Rule Based Standards
• Brief timeline of IASB’s Conceptual framework
• Key concepts within IASB’s conceptual framework
• Latest updates on Conceptual Framework
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3. IASB’s Conceptual Framework
• It is a device used by the IASB to develop IFRS based on
consistent principles and concepts.
• Provides principles to be used by accountants and preparers
for instances where no standards cover treatment. This allows
for alignment with existing accounting policies set as per IFRS.
• Assists users to interpret the Standards.
Conceptual Framework
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4. IASB’s Conceptual Framework
As per IFRS.org, the official website for the IFRS foundation –
“The objective of the Conceptual Framework project is to improve financial reporting
by providing a more complete, clear and updated set of concepts. To achieve this, the
IASB is building on the existing Conceptual Framework—updating it, improving it and
filling in the gaps instead of fundamentally reconsidering all aspects of the Conceptual
Framework.”
Conceptual Framework
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5. Difference between Rule Based and Principle Based Standards
• Rule Based accounting standards are better in providing guidelines to
preparers of financial statements.
• Principle Based accounting standards are better in preventing
contradictions than rule based.
• Rule Based accounting standards can cater to specific industries, however
they can be interpreted wrongfully and misused – This is the BIGGEST
drawback
• Each country can have it’s own rules – Difficulty in cross-border deals,
hence there is a greater push towards harmonization through IFRS
Conceptual Framework
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6. The Accounting Model
Objective of General Purpose Financial Statements
Qualitative Characteristics of Useful Financial Information
Conceptual Framework
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Key concepts within IASB’s conceptual framework

7. Conceptual Framework
The Accounting Model
• Financial statements are prepared on recoverable historical cost
• Nominal Financial capital maintenance concept
Objective of General-Purpose Financial Statements
• Provide financial information about reporting entity
• Usefulness of information to users; investors, lenders, creditors
– Assessing stewardship of management
– Information about financial position, financial performance and change in
cash flows
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8. Conceptual Framework
Qualitative Characteristics of Useful Financial Information
• Include two types of information; Fundamental and Enhancing
• Fundamental includes; Relevance and Faithful Representation
• Enhancing includes; Comparability, verifiability, timeliness and
understandability
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Identify economic phenomenon
Identify type of information
Check for availability of information
and faithful representation.
3-step
Fundamental
Characteristics
Application

9. Recent Updates on Conceptual Framework
• In July of 2013, the IASB had published a Discussion paper known as “A
review of the Conceptual Framework for Financial Reporting”
• Based on the responses received, on May 28th, 2015, the Board released
an Exposure Draft, which is open for comments.
• The comments on the Exposure Draft will be used to publish a revised
Conceptual Framework tentatively in 2016.
• Conceptual Framework does not supersede published accounting
standards, however some entities that use CF in the absence of guidance
from accounting standards, may be affected.
Conceptual Framework
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10. Conceptual Framework
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