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Sharper tools in Framework’s box

Is the International Accounting Standards Board’s revised ‘Conceptual Framework for Financial Reporting’ a solution to all accounting problems? asks Daniela Marciniak.

Daniela Marciniak

June 2018

A lot of work and resources have been devoted to the Conceptual Framework project, which aimed to update and/or clarify existing concepts and fill in gaps where previous versions of the Conceptual Framework have been lacking guidance.

While much has been achieved – for example guidance on measurement, financial performance, derecognition, and the reporting entity has been added to the Conceptual Framework – critics will continue to call for asymmetry in financial statements or a rock-solid definition of financial performance. However, those critics tend to forget that not only the IASB, but also other accounting standard-setters, have been trying to find a definition of the latter, without the desired success.

Therefore, settling for a robust set of concepts rather than no guidance at all seems to be a very good compromise. International Financial Reporting Standards (IFRS) and the Conceptual Framework are, after all, principles-based.

Also, the IASB pre-empted calls for more work to be done or for better concepts by clarifying that the Conceptual Framework can be updated, perhaps not immediately, but when working with it presents an opportunity to improve existing concepts. The IASB has already expressed its intention to update the definition of equity with the outcome of its Financial Instruments with Characteristics of Equity project.

The publication of the revised Conceptual Framework will not immediately change or override any existing IFRS, introduce asymmetry to financial statements or solve all existing accounting problems. It is a practical tool for the IASB that will help it develop and revise IFRS that are based on consistent concepts, and so hopefully solve all accounting problems one day.

The Conceptual Framework describes the objective of, and the concepts for, general purpose financial reporting. It is mainly a tool for the IASB to develop and revise IFRS that are based on consistent concepts, but it might also assist preparers that develop accounting policies when no standard applies or when a standard allows a choice of accounting policy. 

Daniela Marciniak is Manager, Global IFRS Team at Grant Thornton International. She previously worked at the IASB on the Conceptual Framework project. Daniela is member of the LSCA Technical Committee.

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