Gerard explores some of the foundations of the conceptual framework for financial reporting.

1. LO 1: Explain what a conceptual
framework is, and how conceptual
frameworks around the world came
to be developed
1 Created by Dr G. L. Ilott, CQUniversity Australia

2. What is the conceptual framework for financial
reporting?
A conceptual framework (CF) is simply a coherent collection of ideas, concepts and objectives
that systematically flow from an objective and guide the fulfilment of that objective.
The conceptual framework for financial reporting flows from the objective of financial
reporting.
The objective of financial reporting is supported by the CF to define what financial reporting
is, what it seeks to do, and what it contains.
This includes principles for recognising, measuring and reporting the elements of financial
reports.
2 Created by Dr G. L. Ilott, CQUniversity Australia

3. 3 Created by Dr G. L. Ilott, CQUniversity Australia

4. So, what is the objective of (general purpose)
financial reporting?
…to provide financial information about the reporting entity that is useful
to existing and potential investors, lenders and other creditors in making
decisions about providing resources to the entity. Those decisions involve
buying, selling or holding equity and debt instruments, and providing or
settling loans and other forms of credit.
— (IASB 2010, cited in Deegan 2014, p. 217)
Can you see the decision-usefulness nature of this objective?
4 Created by Dr G. L. Ilott, CQUniversity Australia

5. The development of the conceptual framework for
financial reporting
Around the world, the development of conceptual frameworks for financial reporting are
relatively recent.
• Studies occurred in the USA in 1960s.
• The American Institute of Certified Practicing Accountants (AICPA) took up the
challenge during the 1970s.
• The US' Financial Accounting Standards Board (FASB) began publishing statements of
accounting concepts (SACs) in 1978.
• The UK's Corporate Report issued by Institute of Chartered Accountants in England
and Wales in 1975. Impetus for CF development in UK.
5 Created by Dr G. L. Ilott, CQUniversity Australia

6. …Meanwhile in Australia,
Australia began development of its CF in 1980s. Began issuing SACs in
1990.
Through 1990s, both Australia and UK began to develop conceptual
frameworks broadly consistent with that being developed by the IASB.
6 Created by Dr G. L. Ilott, CQUniversity Australia

7. The IASB
From 2005 to 2010, the IASB and FASB had been undertaking joint
development of a single CF -> Convergence project.
• This was suspended in 2010.
Since 2010, the IASB has concentrated on its CF with its member
nations. The FASB has been less interested.
7 Created by Dr G. L. Ilott, CQUniversity Australia

8. Coming up next…
In the next presentation, we will consider
the common elements within conceptual
frameworks for financial reporting.
8 Created by Dr G. L. Ilott, CQUniversity Australia