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What is conceptual framework
1. 1. What is conceptual framework?
Conceptual framework can be seen as an attempt to determine the nature and purpose
of accounting. Conceptual framework should take into account issues surrounding the
theory and concepts of financial reporting and form a coherent and consistent basis
that will underpin the development of accounting standards.
Conceptual framework can be applied to various fields, but when it specifically
related to financial reporting conceptual framework can be seen as statements of
generally accepted accounting principles (GAAP), which form a frame of reference
for the evaluation of existing practices and new developments. The purpose of
financial reporting is to provide useful information as a basis for making economic
decisions, a conceptual framework will be the basis of a theory to determine how
transactions are measured (historical or current value) and reported that how they
produce or deliver to the consumer.
Some accountants have questioned whether the conceptual framework is necessary to
produce reliable financial statements. The history of the past indicates the absence of
the conceptual framework, accounting standards often resulted in a lack of:
Some standard-setting bodies have been biased in their composition, and this
affects the quality and the standards
The issues are the same theory many times were studied by standard for
example, whether the transaction poses assets (research and development) or
liability (environmental provisions)?
2. 2. Why is there a need for conceptual framework?
Good framework will enable the FASB to issue standards that are more useful
and consistent over time. The framework will also improve the understanding
and confidence to users of financial reports for the financial reporting and will
increase the contribution of the financial report.
To be useful, make regulations relating to the construction and concept. A
conceptual framework was developed to allow the IASB issued an
announcement more useful and consistent over time and standard cubic should
occur.
As a result of a soundly developed conceptual framework, the profession will
be able to more quickly solve new and emerging practical with reference to
the existing framework of basic theory. For example, Sunshine Mining (U.S.)
sold two bond issues. It can either redeem them with $ 1,000 in cash or with
50 ounces of silver, whichever is worth more at maturity. Both bonds have a
stated interest rate of 8.5 percent.
To formulate concepts based on the compilation of financial reports. It also
provides guidance in resolving disputes that arise during the process of setting
standards limiting the questions that happened, for example, do certain
specific standards in accordance with the conceptual framework?