Accounting management essay on: Financial report on IASB and FASB

Accounting management essay on: Financial report on IASB and FASB

Introduction

It is very clear that the conceptual framework forms the concept that lie behind the financial reporting. The framework considered as the coherent procedure of concepts which prevail from the objective. The purpose of the financial reporting considered as the basis of framework. Another concepts offer suggestion on searching the financial reporting boundaries, choosing the transactions, other circumstances and events to be presented and how they must be measured and recognized & how they must be communicated and summarized in the financial report. It is viewed that IASB and FASB purpose for the measurement in conceptual framework is to provide the direction for choosing bases of the measurement which satisfy the qualitative features and objectives of the financial reporting.

Conceptual Framework

 Conceptual Framework objects to refine and update the current concepts to show the alterations in the business practices, markets and economic environment which have happened in the previous decades as the concept was first formed (Barth, 2006). Its aim is to form the sound basis for upcoming accounting standards which are principles related, internally dependable and globally converged. Hence, the US FASB and IASB are taking the project conceptual framework jointly. Many individuals have referred the real contribution of the FASB and its continued survival- to rely on the utility and quality of conceptual framework.

US GAAP Conceptual Framework

According to US GAAP, Conceptual Framework considered as system of fundamentals and interrelated objectives which may lead to reliable standards and which stipulates the function, nature and boundaries of financial statements and accounting (Beaver & Demski, 1979).

First level: Basic Objectives

The first level fundamental objective starts with the wide concern for information which is helpful to creditor and investor decisions. It is viewed that first level fundamental objective concentrates on the statements of the finance which offer useful information in the evaluation of potential cash flows for business enterprise.

Second Level Basic Concepts

The objectives of the first level are worried for the purposes and goals of the accounting. Later, we shall explain the paths these purposes and goals are implemented at the third level (Michaely, Roni & Womack, 1999).  Among these two stages it is mandatory to offer blocks of conceptual building which describe the qualitative features of the accounting and explain the components of the financial statements.

Third level: Measurement and Recognition

The conceptual framework third level comprises of concepts which utilize the fundamental objectives of the stage one. These concepts describe how, which and when financial events and elements must be reported, measured and recognized by the system of the accounting.

Reasons for the usage of the Conceptual Framework

First reason, to be helpful, standard setting must maintain on and associate to the established group of objectives and concepts (Black, 1993).  In general, developed framework must allow the FASB to provide more consistent and useful standards throughout the time. It is viewed that conceptual framework enhances the comparability among the financial statements of the Companies.Second reason, emerging practical obstacles must be rapidly solved by referring to the current framework of the fundamental theory.

Reasons for the Joint Framework of the IASB and FASB

The conceptual framework objective is to make the sound basis for the upcoming accounting standards which are principles- associated, internally reliable and globally converged. The new conceptual framework forms on current FASB and IASB frameworks. The first stage of conceptual framework transacts with the purpose and qualitative features of the financial reporting (Black, 1993). The FASB has searched the qualitative features of the accounting which recognize useful information from less useful information for purposes of the decision making. In additional, the FASB has searched various constraints as the portion of conceptual framework. At current, accounting utilizes various terms which have specific and distinctive meanings. The purpose of the joint project is to offer the basis for the formation of the future globally converged standards of the accounting which are internally consistent and shall result in offering helpful information in the financial report for the decision making for the capital providers. It is viewed that IASB and FASB purpose for the measurement in conceptual framework is to offer direction for choosing bases of the measurement which fulfill the qualitative features and objectives of the financial reporting (Lin & Nichols, 1998).

It is realized that both IASB and FASB already have frameworks. The framework of the IASB is useful for the presentation and preparation of the financial statements. Its content reflects the robust affinity with the earlier work of FASB. One significant similarity is like the framework of the FASB; IASB lacks the measurement treatment and incomplete. Both frameworks stress decision usefulness, mainly to the investors in the capital market as the main concentration of the general objective financial statement (Bromwich, 2004).  The basic motivation for combined project is to join the frameworks of two boards for providing the constant intellectual basis for convergence of two groups of standards.  Convergence cannot consider as only motivation but the improvement is equally significant. There are 2 aspects for improvement such as filling gaps for achieving completeness and eliminating inconsistencies for improving the coherence. The greatest gap which is required to be fulfilled is to form the guidance on the measurement. There are various features of coherence of the framework of the IASB which require improvement. The region which has offered specific difficulty currently is the liability definition and mainly the difference among the equity and the liability (Greenwood & Jovanovic, 1990). The project is considered as truly the joint one, while the higher bulk of the existing framework of the FASB and its robust input of the staff show that the initiating position tends to be the existing document of the FASB as compared to the IASB. In most of the cases, there is small distinction among the existing FASB and IASB frameworks, so that distinct influence of the FASB is viewed greatly in exposition style.Conclusion

It is concluded that aim of the Conceptual Framework is to form the sound basis for upcoming accounting standards which are principles related, internally dependable and globally converged. It is viewed that IASB and FASB purpose for the measurement in conceptual framework is to offer direction for choosing bases of the measurement which fulfill the qualitative features and objectives of the financial reporting. The primary encouragement for the combined project is to combine the frameworks of 2 boards for providing the reliable intellectual basis for convergence of two groups of standards. At last it can be said that conceptual framework which is being formed by the IASB and FASB shall be used in the revision and development of future accounting standards.

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