Importance Of Conceptual Framework

A conceptual framework can be defined as a system of concepts and purposes that guide to the creation of a constant set of regulations and standards. Especially in accounting, the rule and standards set by the nature, function and restrict of financial accounting and financial statements. The purpose of the Conceptual framework project is to enhance financial reporting by offering a more accomplish, clear and updated set of concepts. In conceptual framework will form a basis for define how transactions should be calculated (historical value or current value) and reported like how they are presented or communicated to internal or external users. To implement this, the International Accounting Standards Board (IASB) is establishing on the currently

A conceptual framework must consider the theoretical and conceptual issues surrounding financial reporting and for m a coherent and consistent foundation that will underpin the development of accounting standards. It is not surprising that early writings on this subject were mainly from academics. Conceptual frameworks can apply to many disciplines, but when specific ally related to financial reporting, a conceptual framework can be seen as a statement of generally accepted accounting principles (GAAP) that form a frame of reference for the evaluation of existing practices and the development of new ones. As the purpose of financial reporting is to provide useful information as a basis for economic decision making, a conceptual framework will form a theoretical basis for determining how transactions should be measured (historical value or current value) and reported – ie how they are presented or communicated to users. Conceptual frameworks, in general, organize the premises and concepts that underlie corporate accounting, particularly financial

Countries with smaller or less developed economies may not be able to afford them. Rigidity –the CF may provide too much guidance to accounting and standard setting such that it encourages rigidity by making it difficult to introduce new ideas. Conflict between CF and accounting standards which were prepares prior to the development of the CF. Possibility that a conceptual framework may benefit only some of the groups identified as users. The framework may not be workable or acceptable to all interested parties. Development has been incomplete and of limited value Modern attempts are prescriptive not descriptive. In a fast paced global economy, current framework does not allow for resolution of current issues. Process of piece meal change make it difficult to appreciate the extent and direction of change and its implications. First, it is very difficult to set up. Countries which are rich and developed can have their conceptual framework but poor and developing nations can find it expensive and time consuming. Secondly, CFs while providing the standard for accounting practices may lead to rigidity. It may be difficult to bring forward new ideas. Thirdly, conflict may arise between CF and the accounting standards followed prior to the introduction of Conceptual Framework. Finally, Conceptual Framework may not be acceptable to every party. It may only benefit only some interested groups identified as