The IFRS and IASB Conceptual Framework

Question 1

What is a “conceptual framework” for financial reporting?

Answer 1

A list of principles which supports financial accounting and provides a basis for developing accounting standards

Question 2

What are the 2 main purposes of the IASB conceptual framework for financial reporting?

Answer 2

• Helps the IASB in developing IFSR concept and ideas
• Helps in preparing financial reports to develop accounting policies

Question 3

Is the conceptual framework a standard?

Answer 3

No. It only helps create a principal-based standard that improves the quality of financial information

Question 4

What is the objective of general-purpose financial reporting?

Answer 4

To provide financial information about the reporting entity that is useful to creditors, lenders and potential investors in making decisions regarding providing resources to entity

Question 5

Why might existing and potential investors, creditors and lenders be interested in the information provided in general-purpose reports?

Answer 5

Because they expect to receive returns from an investment in the entity concerned. Investors expect dividends, creditors and lenders expect debt repayments.

Question 6

In accordance with the IASB Conceptual Framework, what are the two fundamental characteristics of useful financial information?

Answer 6

Faithful representation and relevance (should be relevant to users decision-making needs to help them predict future outcomes)

Question 7

In accordance with the IASB Conceptual Framework, what are the characteristics of useful financial information?

Answer 7

Comparability, verifiability, timeliness and understandability

Question 8

What are the chapters of the IASB Conceptual Framework?

Answer 8

Chapter 1: The objective of general-purpose financial reporting
Chapter 2: Characteristics of useful financial information
Chapter 3: Financial statements and the reporting entity
Chapter 4: The elements of financial statements
Chapter 5: Recognition and derecognition
Chapter 6: Measurement
Chapter 7: Presentation and Disclosure
Chapter 8: Concepts of capital and capital maintenance

Question 9

What are the six facts about the IASB Conceptual Framework?

Answer 9

1) It is a framework that discusses important topics that the IASB needs to think about
2) It confirms the goal of the IFRS is to provide useful financial information to investors and confirms importance of stewardship
3) It highlights that investors need information about both financial performance and financial position
4) It redefines assets and liabilities based on a company’s rights and obligations
5) It introduces guidance on when to use historical cost versus current value
6) It guides the IASB in setting IFRS standards