The Framework for the Preparation and Presentation of Financial Statements was originally issued in 1989. In 2004, the IASB and the FASB decided to review and revise the conceptual framework. However, this decision changed priorities and the slow progress in the project led to the project being abandoned in 2010. This was after only Phase A of the original joint project was finalised and introduced into the existing framework as Chapters 1 and 3 in September 2010.
The current form of the conceptual framework as at May 2018 provides a revised and complete version of the framework.
Required:
Explain FOUR (4) primary reasons why the IASB believed it was necessary to revise its conceptual framework. (6 marks)
View Solution
- To update the Framework for changes in markets, business practices and economic environment since the original Framework was published in 1989.
- To develop a common conceptual framework between US GAAP and IFRSs so that decisions are based on the same framework in the interests of harmonisation of future standards issued by both bodies.
- To provide a better foundation for developing principles-based and converged standards, including filling in some gaps (e.g. a lack of detail in the definition of the reporting entity).
- In addition, the IASB is interested in ensuring the conceptual framework is suitable for application to not-for-profit and other entities. (4 points @ 1.5 marks each)