This research includes a detailed explanation of the joint project initiated by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) since the emergence of this idea to the present day. The IASB and FASB previously commenced a joint comprehensive project on the Conceptual Framework in 2004 and had split the project into a number of phases. However, during late 2010, the Board effectively deferred further work on the joint project until after other more urgent convergence projects were finalised. Eventually, the boards focused primarily on four specific joint projects: revenue recognition, insurance, financial instruments, and leases.

1. 1
An-Najah NationalUniversity
College ofGraduate Studies
Masterof accounting program
IASB, FASB joint project
By:
Ro’ya Abd El-hafez

2. 2
The International Accounting Standards Board (IASB) and the Financial
Accounting Standards Board (FASB) are independent, private-sector bodies
working to develop and enforcefinancial reporting standards forpublicly-held
companies. (INAA, 2020)
Conceptual Framework.
The Conceptual Framework sets out the fundamental concepts for
financial reporting that guide the Board in developing IFRS Standards. It
helps to ensure that the Standards are conceptually consistent and that
similar transactions are treated the same way, so as to provide useful
information for investors, lenders and other creditors. (IFRS, 2021)
Background
In the 1930s, early attempts to develop Conceptual Frameworks
were made in response to the 1929 stock marketcollapse andsubsequent
GreatDepression. The GreatDepressionledto an increasing recognition
of the need to augment then current Balance Sheet reporting
requirements with an Income Statement. The globalsocialdislocationof
this period establisheda key foundation for society’s interestin financial
reporting. (Sutton, 2011)
In 1970, after five years of study and a succession of drafts, the
Accounting Principles Board (APB) produced Statement No. 4 Basic
Concepts and Accounting Principles Underlying Financial Statements of
Business Enterprises (Accounting Principles Board, 1970). (Sutton, 2011)
In 1973, The SEC gave formal support to the FASB, .From this
time the FASB began work on the development of a Conceptual
Framework. Progressively from this date the Conceptual Framework
showed an increasing focus on prospective and decision-useful
information that, while conceding multiple users, increasingly prioritized
investors and creditors. These developments were reflected in the 1976
Conceptual Framework for Financial Accounting and Reporting issued by
the FASB were confirmed in the following year by a committee of the

3. 3
American Accounting Association (AAA’s) issue of Statement on
Accounting Theory and Acceptance. (Sutton, 2011)
From 1974 to 1985 the FASB developed SFACs 1-5 (the CF). The
emphasis on prospective information gave implicit support for investors and
creditors as the key users. (Sutton, 2011)
Norwalk, CT, December 22, 2021. FASB Issues Two New Chapters
of Its Conceptual Framework. The new chapters of the FASB’s
Conceptual Framework address two important areas of financial
reporting: financial statementelements and presentation,” (FASB, 2021)
The IASC’s Building Projects
In November 1982, the IASC added to its work programme a project on
‘aspects ofthe objectives offinancial statements’. However, the IASC did not
intend at that time to prepare an international conceptual framework. Instead,
the IASC intended that the new project should be ‘a limited study, examining
the separate roles and needs of the various publics to which IASs are
addressed. (Cairns, 2000)
The conference, held at Princeton, New Jersey in August 1986, brought
together standard setters and other policymakers from 24 jurisdictions17, the
IASC, the OECD and the United Nations Centre on Transnational
Corporations. The conference addressed, among other issues, the objectives
of financial statements, the role of a conceptual framework and the
harmonisation of accounting standards. . Cairns dealt with the possibility of
an international conceptual framework in his paper on the role and
achievements of the IASC. (Cairns, 2000)
At its meeting in November 1986, the IASC decided to develop ‘a
framework for financial reporting which would stand apart from IASs.
(Cairns, 2000). It was viewed not as a luxury, but as a necessity. (Cairns,
2000)
The steering committee settled quickly on the structure of its framework.
It would be a single document which would have separate sections dealing
with the objectives and users of financial statements, the qualitative
characteristicsofthose financialstatements,the definitions ofthe balance
sheetand income statementelements, the recognitionofthe elements and

4. 4
the measurement of those elements. Agreement on the content of each
section took longer. The steering committee held a series of meetings during
1987 before approving a draft exposure draft for submission to the IASC
board in March 1988. (Cairns, 2000)
The exposure draft of the framework was published in April 1988. The
timing was significant. The board had just begun its consideration of the
comparability proposals. (Cairns, 2000)
The IASC unanimously approved and published the Framework for the
Preparation and Presentation of Financial Statements in April 1989. (Cairns,
2000)
The 1991 Conference of Standard Setting Bodies
The IASC and the FASB worked to organise a conference of national,
regional and international standard setting bodies in June 1991. (Cairns, 2000)
The objectives of the conference were to: (Cairns, 2000)
 Determine the need for, and the purpose of, a conceptual framework;
 Exchange views and experiences about the usefulness of a conceptual
framework in the setting of accounting standards; (Cairns, 2000)
One of the most significant developments following the first conference
of standard setting bodies was the formation of G4+1 in 1992/9364. The
group’s initial members were the standard setting bodies from Australia,
Canada, the United Kingdom and the United States (G4) plus the IASC (+1).
The initial members were later joined by the standard setting body in New
Zealand. The standard setting body in the Netherlands declined an invitation
to join the group.G4+1 members share an objective of providing quality
financial standards for the primary purposeofproviding information useful to
capital market participants. Group members also share the view that: (Cairns,
2000)
 Financial reporting standards should be based ona conceptualframework;
 Membership of the group requires acceptance of a conceptualframework
which is similar to that of other members;

5. 5
 Seeking common solutions to financial reporting issues requires members
to have the willingness and the ability to commit resources to the resolution
of those issues within the context of a conceptual framework
(Cairns, 2000)
It blamed the East Asian financial crises (1997) on some combination of
crony capitalism. The approach focused on micro- prudential regulation,
improved transparency, domestic financial reform, and adoption of
international financial standards and codes of best practice by developing
nations became the framework for the G-7s response to the crisis.
(Stichele, 2005) (Arnold, 2012)
The joint working group which is preparing a comprehensive exposure
draft based on the 1997 discussion paper is emphasis on the use of
framework concepts. (Cairns, 2000)
The Enron scandal (late 2001) due to the fact that the highly detailed
and technical definition of a subsidiary allowed Enron to avoid the disclosure
of liabilities in controlled but unconsolidated entities. In fact Enron directors,
Lay and Skilling used this in their defence before the court. They claimed that
the use of Special Purpose Entities (SPE) complied with all accounting and
legal obligations. As a consequence of the accounting scandals in the U.S.,
the Sarbanes-Oxley Act was passed by Congress. (Garvey, 2015)
As a consequence, the Concepts (Elements of financial
statements),Superseded. This is a project was initiated in 2001 and was
intended to explore similarities and differences between the definitions of the
elements of financial statements (assets, liabilities, equity, revenues,
expenses, gains, and losses) in the (then) IASC Framework and the existing
conceptualframeworks of national standard setters to determine whether there
are differences that are impediments to convergence. (Deloitte, 2022)
In 2002’s Norwalk Agreement, FASB and the IASB agreed to undertake a
short-term project to remove a variety of individual differences between US
GAAP and IFRS and to remove remaining differences through future joint
projects. The goal of the Norwalk Agreement was to improve the consistency
and comparability of financial statements worldwide. (Baker Tilly US, 2022 )

6. 6
11 September 2008, IASB and FASB update 2006 Memorandum of
Understanding (MoU)
The IASB and FASB previously commenced a joint comprehensive
project on the Conceptual Framework in 2004 and had split the project into
a number of phases. However, during late 2010, the Board effectively
deferred further work on the joint project until after other more urgent
convergence projects were finalised. Eventually, the boards focused
primarily on four specific joint projects: revenue recognition, insurance,
financial instruments, and leases. (Baker Tilly US, 2022 )
17 Nov 2010, The IASB and FASB briefly discussed the timing of each
of the Memorandum of Understanding (MOU) joint projects in preparation
for the intended issue of an updated technical plan. Three projects were
discussed in detail: financial instruments, discontinued operations and
the Conceptual Framework.
As a result of the IASB's Agenda consultation project, the IASB
decided in September 2012 to reactivate the Conceptual Framework
project as an IASB-only comprehensive project. (Deloitte, 2022)
In 2013, FASB and the IASB released largely converged proposals
addressinghowto reportlong-termlease contracts. Theboardsgenerally agreed
companies should record liabilities for lease contractsthatextend formore than
12 months. But the proposals have been met with vocalopposition. The boards
also diverge on other major lease issues, most notably the recognition of
expensesonthe income statement. However, the revenue recognition project
has been the greatest success. (Baker Tilly US, 2022 )
Also In 2013, Discussion Paper DP/2013/1 A Review of the Conceptual
Framework for Financial Reporting published
28 May 2015, Exposure Drafts ED/2015/3 Conceptual Framework for
Financial Reporting and ED/2015/4 Updating References to the Conceptual
Framework published

7. 7
Conceptual Framework — Comprehensive IASB project: Completed
2018. The revisedversionofthe ConceptualFramework wasissuedon29
March 2018. (Deloitte, 2022)
______________________________________________________________________________
Changes in conceptual framework:
Main changes
The revised ConceptualFramework introduces the following main
improvements: (Staff of the IFRS,2018)
New
 Measurement concepts on measurement, including factors to
be considered whenselecting a measurementbasis
 Presentation and disclosure concepts onpresentation and
disclosure,including when to classifyincome and expenses in
other comprehensive income
 Derecognitionguidance on when assets and liabilities are
removed from financial statements (Staff of the IFRS,2018)
Updated
 Definitions definitions of an asset and a liability
 Recognitioncriteria for including assets and liabilities in
financial statements (Staff of the IFRS,2018)
Clarified
 Prudence
 Stewardship
 Measurement uncertainty
 Substance over form (Staff of the IFRS,2018)

8. 8
References
Arnold, P. J. (2012). The political economy of financial harmonization: The
East Asian financial crisis and the rise of international accounting
standards. Accounting, Organizations and Society, 37, pp. 361-381.
Baker Tilly US. (2022 ). Progress report: International convergence of
accounting standards. Retrieved from www.bakertilly.com:
https://www.bakertilly.com/insights/progress-report-international-
convergence-of-accounting-standards
Cairns, D. (2000). The Conceptual Framework — The International
Experience. SSRN Electronic Journal, pp. 1-24.
doi:10.2139/ssrn.2379002
Deloitte. ( 2022). Conceptual framework. Retrieved from www.iasplus.com:
https://www.iasplus.com/en/projects/completed/framework
Deloitte. (2022). Completed projects. Retrieved from www.iasplus.com:
https://www.iasplus.com/en-gb/projects/iasb-and-ifrs-
projects/completed
Deloitte. (2022). Conceptual Framework — Comprehensive IASB project.
Retrieved from www.iasplus.com: https://www.iasplus.com/en-
gb/projects/iasb-and-ifrs-projects/completed/conceptual-framework-
iasb
Deloitte. (2022). IASB-FASB convergence. Retrieved from www.iasplus.com:
https://www.iasplus.com/en/projects/completed/other/iasb-fasb-
convergence
FASB. (2021). FASB Issues TwoNew ChaptersofIts ConceptualFramework.
Retrieved from www.fasb.org:
https://www.fasb.org/page/getarticle?uid=fasb_MEDIA-ADVISORY-
12-22-21_022820221200

9. 9
Garvey, A. M. (2015). ACCOUNTING PHILOSOPY: The IASB
CONCEPTUAL FRAMEWORK AND THE FASB CODIFICATION.
In THE CONVERGENCE JOURNEY Edition: 1 (pp. 15-40). 978-84-
15305-88-0.
Ibrahim, B. (2020). General Accounting1. Retrieved from www.univ-
annaba.dz: https://elearning-facsceg.univ-
annaba.dz/mod/resource/view.php?id=5256&forceview=1
IFRS. (2021). Conceptual Framework for Financial Reporting. Retrieved
from www.ifrs.org: https://www.ifrs.org/issued-standards/list-of-
standards/conceptual-framework/
INAA. (2020). What’s the Relationship Between IASB and FASB? Retrieved
from www.inaa.org: https://www.inaa.org/whats-the-relationship-
between-iasb-and-fasb/
Staff of the IFRS. (2018). Conceptual Framework Project Summary.
Retrieved from www.ifrs.org:
https://www.ifrs.org/content/dam/ifrs/project/conceptual-
framework/fact-sheet-project-summary-and-feedback-
statement/conceptual-framework-project-summary.pdf
Stichele, M. V. (2005). Critical Issues in the Financial Industry SOMO
FinancialSector Report. Amsterdam: ResearchCenter for Research on
Multinational Corporations (SOMO).
Sutton, D. (2011). CONCEPTUAL FRAMEWORK COHERENCE: WHY
AND HOW. Working Paper, 88.
Sutton, D. (2011). Conceptual Framwork COHERENCE: WHY AND HOW.
SSRN Electronic Journal, pp. 1-29. doi: 10.2139/ssrn.2028740

10. 10
Appendix (1)
Tables showing issues relatedto the convergence between FASB and
IASB
Note:that the convergenceprojectis coming to an end and no new
projects will be added to the agenda.
Short-term convergenceprojects (Deloitte, 2022)
Project Status
Borrowing costs IASB reissued IAS 23 Borrowing Costs in 2008
Discontinued operations (IASB
only)
The IASB issued IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations in March 2004
Fair value option for financial
instruments (FASB only)
Completed
Government grants Joint work on this project has been discontinued
Impairment Joint work on this project has been discontinued
Income taxes Joint work on this project has been discontinued
Investment properties The FASB is actively working on this project
Joint arrangements IASB issued IFRS 11 Joint Arrangements in 2011
Research and development
(FASB only)
Completed
Segment reporting IASB issued IFRS 8 Operating Segments in 2008

11. 11
Subsequent events (FASB
only)
Majorjoint projects (Deloitte, 2022)
Project Status
Business com-
binations
Converged standards issued in 2008
Conceptual
Framework
This project has been partially completed. Work on further phases was
discontinued and the IASB undertook an IASB-only comprehensive
project
Consolidation Converged standards issued in 2011
Derecognition The IASB and FASB could not reach a converged solution and instead
additional disclosures were implemented.
Fair value
measurement
Converged standards issued in 2011
Financial in-
struments
This is a high-priority project of both boards and work is currently
under way. This project compromises a number of projects, some
completed and some under way. In some areas,divergent outcomes
have been developed, and timing of the issuance of pronouncements is
no longer aligned. The IASB has completed work on IFRS 9 Financial
Instruments.
Financial
statement pre-
sentation
Joint work on this comprehensive project has been discontinued. Some
amendments to existing requirements have been made in relation to the
presentation of the statement of comprehensive income
Insurance
contracts
Joint work on this overall project has been discontinued, although the
IASB and FASB continue to liaise on some issues

12. 12
Intangible
assets
The IASB and FASB decided in 2007 not to add this project to their
joint agenda
Leases This is a high-priority project of both boards and work is currently
under way, although divergence has occurd regarding some aspects
Liabilities and
equity
Joint work on this project has been discontinued
Post-employ-
ment benefits
Joint work on this project has been discontinued
Revenue
recognition
IFRS 15 Revenue fromContracts with Customers was issued In May
2014. The standard is fully converged with ASU 2014-09 Revenue from
Contracts with Customers.
Projectmilestones
 The table below reflect key milestones in relation to the overall con-
vergence project. Each individual topic which is part of the conver-
gence process. (Deloitte, 2022)
Date Development Comments
29 October 2002 IASB and FASB enter into a Memo-
randum of Understanding on conver-
gence
27 February 2006 IASB and FASB update and reissue
Memorandum of Understanding
(MoU)
11 September 2008 IASB and FASB update 2006 Memo-
randum of Understanding (MoU)
Set the goal of com-
pleting the major joint
projects by 2011
2 April 2009 G20 Leaders Declaration on Strength-
ening the Financial Systempublished
Contains recommenda-
tions for dealing with

13. 13
various financial
accounting issues
28 September 2009 G20 Leaders Final Statement set goal
to complete convergence of
accounting standards across the G20
member nations by June 2011
5 November 2009 Joint IASB-FASB statement reaffirm-
ing commitment to convergence
Includes a 'pathway to
completion' of major
projects by 2011
19 October 2010 Request forViews on Effective Dates
and Transition Methods published
Comment deadline 31
January 2011
21 April 2011 IASB-FASB progress report on con-
vergence
Timetable for comple-
tion of convergence
projects moved to the
end of 2011
4 November 2011 G20 Leaders Cannes Summit Final
Declaration calls for completion of
convergence project
G20 requests a
progress report in
April 2012
Conceptualframework (Deloitte, 2022)
Title Description
Concepts (Elements of
financial statements)
Superseded. This is a project was initiated in 2001 and was intended to
explore similarities and differences between the definitions of the elements
of financial statements. This project has been replaced by the comprehen-
sive Conceptual Framework joint project being undertaken by the IASB
and FASB.
Conceptual Framework
— Comprehensive
IASB project
Completed 2018. The revised version of the Conceptual Framework was
issued on 29 March 2018.
Conceptual Framework
— IASB-FASB joint
project
Originally a joint IASB-FASB project to develop a common conceptual
framework to be used as a basis for accounting standards, this project was
suspended and replaced in 2012 by an IASB-only comprehensive project.

14. 14
Conceptual Framework
Phase F — Purpose
and status
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with the Conceptual Framework's authoritative status,
with the goal of developing a framework that is of comparable authority
for the use of both the IASB and FASB in the standard-setting process.
This project was discontinued when the overall IASB-FASB project was
replaced by an IASB-only comprehensive project during 2012.
Conceptual Framework
Phase A – Objective
and qualitative charac-
teristics
Completed 2010. Part of the comprehensive project on the Conceptual
Framework, dealing with topics such as stewardship, primary users and
attributes that make financial information useful. 'Conceptual Framework
for Financial Reporting 2010' was issued on 28 September 2010.
Conceptual Framework
Phase E — Presenta-
tion and disclosure
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with the concepts underlying display and disclosure
of financial information, including the boundaries of such information.
This project was replaced by an IASB-only comprehensive project during
2012.
Conceptual Framework
Phase C — Measure-
ment
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with how the various elements of the financial state-
ments should be measured. This project was replaced by an IASB-only
comprehensive project during 2012.
Conceptual Framework
Phase B — Elements
and recognition
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with the various elements of the financial statements,
such as assets, liabilities, revenues and expenses and their broad recogni-
tion requirements. This project was replaced by an IASB-only comprehen-
sive project during 2012.
Conceptual Framework
Phase D — Reporting
entity
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with the boundaries of the reporting entity. This
project was replaced by an IASB-only comprehensive project during 2012.
Conceptual Framework
Phase H — Remaining
issues
Part of the IASB-FASB comprehensive project on the Conceptual
Framework, dealing with any residual issues after completion of the other
phases. This project was discontinued when the overall IASB-FASB
project was replaced by an IASB-only comprehensive project during 2012.
Conceptual Framework
Phase G — Applica-
tion to not-for-profit
entities
Part of the comprehensive project on the Conceptual Framework, which
will consider the applicability of the concepts developed in earlier phases
to not-for-profit entities in the private sector. This project was discontin-
ued when the overall IASB-FASB project was replaced by an IASB-only
comprehensive project during 2012.
Project milestones (Deloitte, 2022)
Date Development Comments
September 2012 IASB-only comprehensive project added to the
agenda
Discussion Paper
expected in 2013,
project aims to be
completed in 2015

15. 15
18 July 2013 Discussion Paper DP/2013/1 A Review of the
Conceptual Framework for Financial
Reporting published
Comment deadline 14
January 2014
28 May 2015 Exposure Drafts ED/2015/3 Conceptual
Framework for Financial Reporting and
ED/2015/4 Updating References to the Conceptual
Framework published
Comment deadline 26
October 2015
22 September
2015
IASB decides to extend comment period New comment
deadline 25 November
2015
29 March 2018 revised Conceptual Framework for Financial
Reporting and Amendments to References to the
Conceptual Framework in IFRS
Standards published

16. 16
Appendix (2)
Details changes in conceptual framework:
Chapter 1—The objective of financial reporting
This chapter was issued in 2010 and went through extensive due process
at that time. Therefore, in revising the Conceptual Framework, the Board did
not fundamentally reconsider this chapter. However, it clarified why
information used in assessing stewardship is needed to achieve the
objective of financial reporting. (Staff of the IFRS, 2018)
Stewardship:Users of financial reports need information to help them assess
management’s stewardship. The Conceptual Framework explicitly discusses
this need as well as the need for information that helps users assess the
prospects for future net cash inflows to the entity (Staff of the IFRS, 2018)
Users of financial reports Users of financial reports are an entity’s
existing and potential investors, lenders and other creditors. Thoseusers must
rely on financial reports for much of the financial information they need.
(Staff of the IFRS, 2018)
Chapter 2—Qualitative characteristics of useful financial information
Summary of changes

17. 17
This chapter was issued in 2010 and went through extensive due process
at that time. Therefore, in revising the ConceptualFramework the Board did
not fundamentally reconsider this chapter. However, the Board clarified the
roles of prudence, measurement uncertainty and substance over form in
assessing whether information is useful. (Staff of the IFRS, 2018)
Prudence: Neutrality is supported by the exercise of prudence. Prudence is
the exercise of caution when making judgements under conditions of
uncertainty. Prudence does not allow for overstatement or understatement of
assets, liabilities, income or expenses. (Staff of the IFRS, 2018)
Measurement uncertainty: Measurement uncertainty does not prevent
information from being useful. However, in some cases the most relevant
information may have such a high level of measurement uncertainty that the
most useful information is information that is slightly less relevant but is
subject to lower measurement uncertainty. (Staff of the IFRS, 2018)
Chapter 3—Financial statements and the reporting entity
Summary of changes
This chapter is new. (Staff of the IFRS, 2018)
Boundary of a reporting entity
Determining the appropriate boundary of a reporting entity can be difficult if,
for example, the entity is not a legal entity. In such cases, the boundary is
determined by considering the information needs of the users of the entity’s
financial statements. Those users need information that is relevant and that
faithfully represents what it purports to represent. A reporting entity does not
comprise an arbitrary or incomplete collection of assets, liabilities, equity,
income and expenses. (Staff of the IFRS, 2018)
This chapter describes the objective and scope of financial statements and
provides a description of the reporting entity (Staff of the IFRS, 2018)
Reporting entity • an entity that is required, or chooses,to prepare financial
statements • not necessarily a legal entity—could be a portion of an entity or
comprise more than one entity. (Staff of the IFRS, 2018)

18. 18
The previous definition: of a reporting entity proposed in the exposure draft
was: A reporting entity is a circumscribed area of economic activities whose
financial information has the potential to be useful to existing and potential
equity investors, lenders, and other creditors who cannot directly obtain the
information they need in making decisions about providing resources to the
entity and in assessing whether the management and the governing board of
that entity have made efficient and effective use of the resources provided.
(Staff of the IFRS, 2018)
Definition of the reporting entity under the new conceptual framework
(2018):
A reporting entity is an entity that is required, or chooses, to prepare
financial statements. It can be a single entity or a portion of an entity or
can comprise more than one entity. A reporting entity is not necessarily
a legal entity. (Staff of the IFRS, 2018)
Financial statements a particular form of financial reports that provide
information about the reporting entity’s assets, liabilities, equity, income and
expenses. (Staff of the IFRS, 2018)
Consolidated financial statements: provide information about assets,
liabilities, equity, income and expenses of both the parent and its subsidiaries
as a single reporting entity. (Staff of the IFRS, 2018)
Unconsolidated financial statements: provide information about assets,
liabilities, equity, income and expenses of the parent only. (Staff of the IFRS,
2018)
Combined financial statements: provide information about assets,
liabilities, equity, income and expenses of two or more entities that are not all
linked by a parent-subsidiary relationship. (Staff of the IFRS, 2018)
Chapter 4— The elements of financial statements
Summary of changes
The definitions ofan assetand a liability have been refined and the definitions
of income and expenses have been updated only to reflect that refinement.
(Staff of the IFRS, 2018)

19. 19
The definition of equity as the residual interest in the assets of the entity after
deducting all its liabilities is unchanged. The Board’s research project on
Financial Instruments with Characteristics of Equity is exploring the
distinction between liabilities and equity. (Staff of the IFRS, 2018)
Previous definition of an asset A resource controlled by the entity as a result
of past events and from which future economic benefits are expected to flow
to the entity. (Staff of the IFRS, 2018)
Revised definition of an asset A present economic resource controlled by the
entity as a result of past events An economic resource is a right that has the
potential to produce economic benefits. (Staff of the IFRS, 2018)
Main changes in the definition of an asset (Staff of the IFRS, 2018)
• A separate definition ofan economic resource—to clarify that an asset is the
economic resource, not the ultimate inflow of economic benefits (Staff of the
IFRS, 2018)
• Deletion of ‘expected flow’—it does not need to be certain, or even likely,
that economic benefits. (Staff of the IFRS, 2018)
• A low probability of economic benefits might affect recognition decisions
and the measurement of the asset will arise
(Staff of the IFRS, 2018)
Previous definition of a liability A present obligation of the entity arising
from past events, the settlement of which is expected to result in an outflow
from the entity of resources embodying economic benefits. (Staff ofthe IFRS,
2018)
Reviseddefinition of a liability A present obligation of the entity to transfer
an economic resource as a result of past events An obligation is a duty or
responsibility that the entity has no practical ability to avoid. (Staff of the
IFRS, 2018)
Main changes in the definition of a liability
• Separate definition of an economic resource—to clarify that a liability is the
obligation to transfer the economic resource, not the ultimate outflow of
economic benefits. (Staff of the IFRS, 2018)
• Deletion of ‘expected flow’—with the same implications as set out above
for an asset. (Staff of the IFRS, 2018)

20. 20
• Introduction of the ‘no practical ability to avoid’ criterion to the definition
of obligation. (Staff of the IFRS, 2018)
No practical ability to avoid
The revised Conceptual Framework discusses how the ‘no practical ability to
avoid’ criterion is applied in the following circumstances: (Staff of the IFRS,
2018)
(a) If a duty or responsibility arises from the entity’s customary practices,
published policies orspecific statements—the entity has an obligation if it has
no practical ability to act in a manner inconsistent with those practices,
policies or statements. (Staff of the IFRS, 2018)
(b) if a duty or responsibility is conditional on a particular future action that
the entity itself may take—the entity has an obligation if it has no practical
ability to avoid taking that action (Staff of the IFRS, 2018)
Unit of account: Unit of account the right(s) or obligation(s), or group of
rights and obligations, to which recognition criteria and measurement
concepts are applied (Staff of the IFRS, 2018)
Selecting the unit of account
Relevance • a unit of accountis selected to provide relevant information about
the asset or liability and any related income and expenses (Staff of the IFRS,
2018)
Faithful representation • a unit of account is selected to provide a faithful
represention of the substanceof the transaction or other event from which the
asset, liability and any related income or expenses have arisen (Staff of the
IFRS, 2018)
Revised definition of income Increases in assets, or decreases in liabilities,
that result in increases in equity, other than those relating to contributions
from holders of equity claims (Staff of the IFRS, 2018)

21. 21
Reviseddefinition of expenses Decreases in assets, orincreases in liabilities,
that result in decreases in equity, other than those relating to distributions to
holders of equity claims. (Staff of the IFRS, 2018)
Executory contract: An executory contract is a contract that is equally
unperformed. It establishes a single asset or liability for the inseparable
combined right and obligation to exchange economic resources. (Staff of the
IFRS, 2018)
Substance of contracts To represent contractual rights and obligations
faithfully, financial statements must reporttheir substance. In somecases, the
substanceof such rights and obligations is clear from a contract’s legal form.
But, in other cases, the terms of the contract, or of a group or series of
contracts, may require analysis to identify the substance of the rights and
obligations. (Staff of the IFRS, 2018)
Chapter 5—Recognition and derecognition
Summary of changes
The previous recognition criteria were that an entity should recognise an item
that met the definition of an element if it was probable that economic benefits
would flow to the entity and if the item had a cost or value that could be
determined reliably. (Staff of the IFRS, 2018)
The revised recognition criteria refer explicitly to the qualitative
characteristics of useful information. (Staff of the IFRS, 2018)
The Board’s aim was to develop a more coherent set of concepts, not to
increase or decrease the range of assets and liabilities recognised.
The guidance on derecognition is new. (Staff of the IFRS, 2018)
Derecognition: the removal of all or part of a recognised asset or liability
from an entity’s statement of financial position. (Staff of the IFRS, 2018)
Derecognition normally occurs
Foran asset:when the entity loses controlofall or partof the recognised asset
For a liability: when the entity no longer has a present obligation for all or
part of the recognised liability. (Staff of the IFRS, 2018)

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Derecognition aims to faithfully represent both • any assets and liabilities
retained after the transaction that led to the derecognition • the change in the
entity’s assets and liabilities as a result of that transaction. (Staff of the IFRS,
2018)
Derecognition resulting from a transfer
Normally, a faithful representation of a transfer of an asset or liability is
achieved by derecognition of the asset or liability with appropriate
presentation and disclosure. (Staff of the IFRS, 2018)
However, in limited cases, it may be necessary to continue to recognise a
transferred componentof an asset or liability together with a liability or asset
for the proceeds received or paid, with appropriate presentation and
disclosure. (Staff of the IFRS, 2018)
Chapter 6—Measurement
Summary of changes
The previous version of the Conceptual Framework included little guidance
on measurement. The revised Conceptual Framework describes what
information measurement bases provide and explains the factors to consider
when selecting a measurement basis. (Staff of the IFRS, 2018)
Historical cost measurement bases
• historical cost provides information derived, at least in part, from the price
of the transaction or other event that gave rise to the item being measured •
historical costofassets is reduced if they becomeimpaired and historical cost
ofliabilities is increased if they becomeonerous • oneway to apply a historical
cost measurement basis to financial assets and financial liabilities is to
measure them at amortised cost (Staff of the IFRS, 2018)
Current value measurement bases • current value provides information
updated to reflect conditions at the measurement date • current value
measurement bases include: (Staff of the IFRS, 2018)
Fairvalue • the price that would bereceived to sell an asset, orpaid to transfer
a liability, in an orderly transaction between market participants at the
measurement date • reflects market participants’ current expectations about
the amount, timing and uncertainty of future cash flows (Staff of the IFRS,
2018)

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Value in use (for assets)fulfilment value (for liabilities)
• reflects entity-specific current expectations about the amount, timing and
uncertainty of future cash flows (Staff of the IFRS, 2018)
Current cost
reflects the current amount that would be: (Staff of the IFRS, 2018)
 paid to acquire an equivalent asset
 received to take on an equivalent liability
The factors to be consideredwhen selecting a measurement basis are
relevance and faithful representation, because the aim is to provide
information that is useful to investors, lenders and other creditors
Factors to consider in selecting a measurement basis (Staff of the IFRS,
2018)
A- Relevance
Relevance of information provided by a measurement basis is affected by:
1. characteristics of the asset or liability
The variability ofcashflows • sensitivity ofthe value to market factors
or other risks • for example, amortised cost cannot provide relevant
information about a deriviative (Staff of the IFRS, 2018)
2. contribution to future cash flows
• Whether cash flows are produced directly or indirectly in combination
with other economic resources (Staff of the IFRS, 2018)
• The nature of the entity’s business activities (Staff of the IFRS, 2018)
• for example, if assets are used in combination to produce goods or
services, historical cost can provide relevant information about margins
achieved in a period (Staff of the IFRS, 2018)
B- Faithful representation
Whether a measurement basis can provide a faithful representation is
affected by: (Staff of the IFRS, 2018)
1. measurement inconsistency
If financial statements contain measurement inconsistencies
(accounting mismatch), those financial statements may not faithfully
represent some aspects of the entity’s financial position and financial
performance (Staff of the IFRS, 2018)
2. measurement uncertainty
Does not necessarily prevent the use of a measurement basis that
provides relevant information • but if too high might make it necessary

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to consider selecting a different measurement basis (Staff of the IFRS,
2018)
Selecting a measurement basis
In selecting a measurementbasis, it is necessaryto considerthe nature of
the information in both the statement of financial position and the
statement(s) of financial performance. The relative importance of each
factor to be considered (see boxes) depends upon the facts and
circumstances of individual cases. Consideration of the factors and the
costconstraintis likelyto result in the selectionofdifferentmeasurement
bases for different assets, liabilities, income and expenses. (Staff of the
IFRS, 2018)
Chapter 7—Presentation and disclosure
Summary of changes This chapter is new.
This chapter includes concepts on presentation and disclosure and guidance
on including income and expenses in the statement of profit or loss and other
comprehensive income. (Staff of the IFRS, 2018)
The statement of profit or loss
 The statement of profit or loss is the primary source of information about
an entity’s financial performance for the reporting period. (Staff of the
IFRS, 2018)
 Profit or loss could be a section of a single statement of financial
performance or a separate statement. (Staff of the IFRS, 2018)
 The statement(s) of financial performance include(s) a total (subtotal) for
profit or loss. (Staff of the IFRS, 2018)
 In principle, all income and expenses are classified and included in the
statement of profit or loss. (Staff of the IFRS, 2018)
Other comprehensive income
 In exceptional circumstances, the Board may decide to exclude from the
statement of profit or loss income or expenses arising from a change in
current value ofan assetorliability and include thoseincome and expenses
in other comprehensive income. (Staff of the IFRS, 2018)

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 The Board may make such a decision when doing so would result in the
statement of profit or loss providing more relevant information or a more
faithful representation. (Staff of the IFRS, 2018)
Recycling
 In principle, income and expenses included in other comprehensive
income in one period are recycled to the statement of profit or loss in a
future period when doing so results in the statement of profit or loss
providing more relevant information or a more faithful representation.
(Staff of the IFRS, 2018)
 When recycling does not result in the statement of profit or loss providing
more relevant information ora more faithful representation, the Board may
decide income and expenses included in other comprehensive income are
not to be subsequently recycled. (Staff of the IFRS, 2018)
Better Communication
Information about assets, liabilities, equity, income and expenses is
communicated through presentation and disclosure in the financial statements.
Effective communication of information in financial statements makes that
information more relevant and contributes to a faithful representation of an
entity’s assets, liabilities, equity, income and expenses. The revised
Conceptual Framework includes concepts that describe how information
should be presented and disclosed in financial statements. The Board is also
working on several projects on the theme of Better Communication to make
financial information more useful to investors, lenders and other creditors and
to improve the communication of that information. (Staff of the IFRS, 2018)
Exemptions
 IFRS 3 Business Combinations To avoid unintended consequences,
acquirers are required to apply the definitions of an assetand a liability and
supporting concepts in the previous, rather than the revised, Conceptual
Framework. The Board plans to assess howIFRS 3canbeupdated without
unintended consequences. (Staff of the IFRS, 2018)

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 Regulatory account balances When developing accounting policies for
regulatory accountbalances applying IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors, entities are required to refer to the
previous, rather than the revised, Conceptual Framework. This avoids
entities revising those accounting policies twice within a shortperiod: once
for the revised Conceptual Framework and again when a revised Standard
on rate-regulated activities is issued. (Staff of the IFRS, 2018)