Conceptual Framework

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13 Δεκ 2013 (πριν από 3 χρόνια και 10 μήνες)

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Chapter 2

Conceptual Context

Financial Information Analysis

2

Copyright 2006 John
Wiley & Sons Ltd

Conceptual Framework



Unified system of thought’


Foundation upon which to build practice


Issues:


Should items be included (recognised)?


At what value (measurement)?


Who decides?


Should content vary with user group?


Alternatives to financial statements?


Disagreement as to need and focus

Financial Information Analysis

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Copyright 2006 John
Wiley & Sons Ltd

Players


Profession


Government


Users


investors/lenders


employees


interest groups


Vested interests: political nature of process

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Copyright 2006 John
Wiley & Sons Ltd

US


AICPA/SEC


Wheat/Trueblood


FASB Conceptual Framework Project


user group, decision
-
making, focus


objectives, characteristics, elements, etc


recognition & measurement


an advance, but less than anticipated


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Copyright 2006 John
Wiley & Sons Ltd

UK


Adopted US model


SSAP 2,
Disclosure of Accounting Policies


fundamental concepts


going concern


accruals/matching


consistency


prudence


bases


policies


“Substance over Form”


FRS 18,
Accounting Policies

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Copyright 2006 John
Wiley & Sons Ltd

UK
(continued)


Corporate Report (cf Trueblood)


Sandilands
-

value/inflation


MCRV
-

radical proposals


Solomons
-

‘value to the business’


ASB’s
Statement of Principles


8 chapters


follows FASB outline and emphasis


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Copyright 2006 John
Wiley & Sons Ltd

ASB SoP

1. Objectives
-

users/decision
-
making

2. Reporting Entity
-

report if demand exists

3. Qualitative
-

relevant, understandable

4. Elements
-

assets, liabilities

5. Recognition
-

balance sheet focus

6. Measurement
-

‘value to the business’

7. Presentation
-

detail, prominence, etc.

8. Interests in other entities

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Copyright 2006 John
Wiley & Sons Ltd

SoP


Main elements:


subordination of accruals to recognition


B/S perspective
-

P&L as by
-
product of B/S


STRGL
-

realised v. unrealised


evolution towards ‘value’ measurement


Criticisms:


unnecessarily radical (recognition v.
accruals)?


users not seeking change to value measures?

Financial Information Analysis

9

Copyright 2006 John
Wiley & Sons Ltd

IASB Conceptual Framework


Again, followed US template


1989:
‘Framework for the Presentation and
Preparation of Financial Statements’


Objectives


Qualitative Characteristics


Elements


Recognition


Measurement


IASB/FASB:
Joint Conceptual Framework
Project

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Copyright 2006 John
Wiley & Sons Ltd

Fair value


IASB favours ‘Fair Value’ as valuation
basis


“amount at which asset exchanged between
knowledgeable and willing parties in arms
-
length transaction”


Radical implications for accounting statements


Attempt to portray “economic reality”


Will introduce more volatility and subjectivity


Decision usefulness v. stewardship

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Copyright 2006 John
Wiley & Sons Ltd

Summary


Role of conceptual framework


Dominance of Anglo
-
American perspective


Formulated via political process


User emphasis


Importance of (and failure to resolve)
Recognition and Measurement issues


Internationalisation of project


Future of Conceptual Framework Project?


Fair Value