Session 2 - FASB's Conceptual Framework (Essay)

Question 1

What is a Conceptual Framework?

Answer 1

A blueprint for accounting theory
Foundation of GAAP
A general frame of reference

Question 2

Why do we need a Conceptual Framework in accounting?

Answer 2

(a) Improved communication and better understanding
(b) Defense against political pressure: CF adds credibility to financial reporting
(c) To maintain consistency with overall objectives of financial reporting
(d) Economizing effort: no need to reinvent the wheel

Question 3

2 Primary Qualities of Accounting Information

Answer 3

Relevance & Reliability