.jpg)
The biggest participation and
benefit of conceptual framework is that it helps in understanding and decoding
the accounting details included in the financial report. Few other essential
reasons why it is useful are described below:
It allows the customer of financial
details to comprehend the accounting standard and IASB's idea behind its formulation.
It provides a route for further development of accounting requirements. It even
allows IASB by offering guidelines to reduce different accounting treatment
permitted by IFRS in a situation. It substantiates the stability of financial statements,
reports and the accounting career.
Conceptual Framework has also
resolved several problems which were uncertain by accounting standards for a
while. Events and dealings that can't be worked by designed financial accounting
standards are also settled by the help of conceptual framework. It has provided
guidance with regards to qualitative features of financial details. Companies
have also been helped by conceptual framework in selecting the most suitable treatment
permitted by financial accounting standard by offering reasons for it. New accounting
standards are designed by the national accounting standard establishing system
with the help of conceptual framework.
It even allows the auditor to
form his opinion about the financial statement, that whether it is made in accordance
to IFRS or not. It allows the management to apply IFRS while creating financial
statements and deal with situations where there is no relevant standard. It
also provides details to customers who are concerned in the perform of the
IASB.
IASB and FASB considered that it
is essential to create a combined conceptual framework because it is essential
to create strong reasons for accounting standards that are principles-based,
reliable and internationally recognized. To create financial decision it is
essential that the decision is depending on something that is principle-based
and not personal concepts of the each panel. The problem with personal
conceptual framework of an personal conventional setter may come to a positive
summary in short-term, but as these concepts are personal and are thoughts of
present associates of standard-setters, it might result in disputes or
modification again and again as new associates surpass in the standard-setting
system over the timeframe, leading to irregularity of concepts and creating it
challenging for the customers to create their choice. This is the reason that
both the forums have made the decision to spend their initiatives to create
combined conceptual framework.
The IASB and FASB considered that
reconsidering all the concepts would not be a practical use of their knowledge
and research. Major aspects of the frameworks by both systems look like to an
extent and don't require any possible modifications. Therefore both the systems
have determined that instead of changing all the factors and framework they
would focus on improving present frameworks, showing priority for problems
which would eliminate the aim of standard establishing.
IASB and FASB believe that when
this would be completed, it will be one document dealing with all the standards
and problems. A typical set of standards that will be globally approved is the
purpose of IASB and FASB. Since 2002 both forums (IASB and FASB) have been
working together to achieve this purpose, by eliminating the variations between
IFRSs and generally approved accounting principles (GAAP). Another purpose of
the be a part of conceptual framework is keeping the present concepts up to
date, as per the market trends, business practice these days. IASB and FASB
haven't determined in general about the stability of the combined conceptual
framework; but are certain and believe that combined conceptual framework will
not have the same position as financial confirming requirements. Joint
conceptual framework won't create present requirements worthless, although some
of the present requirements may issue with be a part of structure but the panel
will have to consider creating these requirements constant with their plans.
There were many breaks in the
conceptual framework of personal forums for example both the forums hadn't
performed their discussion on idea of reporting entity. It was after the development
of combined conceptual framework that these conceptual breaks were mentioned
and a globally approved standard was established. Filling the gaps in both the
board's framework is also the purpose of be a part of panel.
.jpg)