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Abstract
In a broad sense, a conceptual framework can be seen as a structured theory of accounting. A conceptual framework is intended to set forth objectives and fundamental concepts that will be the basis for the development of accounting standards.
A complete, internally consistent, and logical conceptual framework assists the standard setters in developing new and improving existing standards based on underlying concepts. It also assists preparers in applying financial reporting standards, auditors in providing an opinion on whether the financial statements are in accordance with a given set of standards, and users in interpreting the information presented in the financial statements.
Moreover, such a well developed conceptual framework facilitates communication between national and international standard setting bodies.
In 2004, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) began a joint project to revise and converge their respective conceptual frameworks. The six-year long cooperation on that project resulted in convergence regarding the objective of general purpose financial reporting and the qualitative characteristics of useful financial information.
However, in late 2010 the Boards, preoccupied with other joint convergence projects, agreed to discontinue the joint efforts in order to work on their respective frameworks.
As the convergence process pursued by FASB and IASB moved the accounting standards into a less rule-based and more principles-based direction, the creation of a well-structured accounting theory has become of paramount importance.
No wonder that when questioned about the IASB agenda in 2011, many stakeholders identified the conceptual framework as a priority project.
Consequently, the IASB restarted its conceptual framework project in 2012, and independently developed an Exposure Draft of the Conceptual Framework for Financial Reporting in 2015. The final version of the revised conceptual framework was issued on March 29, 2018.
Meanwhile, in January 2014, the FASB reactivated its conceptual framework project, focusing on concepts for presentation and measurement. The measurement portion of the project is still at the initial deliberations stage, but a limited Exposure Draft addressing issues of presentation, which would become Chapter 7 of Concepts Statement 8, was issued in 2016.
More recently the FASB expanded the conceptual framework project by starting initial deliberations of issues related to the elements of financial statements.
The recommendations to continue independent work on the respective...