FINANCIAL REPORT

Financial Report



Table of Contents

Executive Summary3

Introduction4

Case Analysis (Findings)5

Users of Conceptual Frameworks in Accounting7

Advantages and Disadvantages of conceptual frameworks8

IASB Framework in Australia and its need10

Conclusion13

References14

Executive Summary

Conceptual framework is a constitution, i.e. a structured set of objectives and principles of inter-related with which it would be possible to develop consistent standards; prescribed in this constitution would be the nature, functions and limitations of financial accounting and financial statements. This research is based on the integration of conceptual accounting frameworks within accounting theory and practice. The research enlightens the significant impact of these frameworks with respects to advantages and disadvantages of their use. The research also discusses the integration of FASB and IASB within Australia. Furthermore, there is a roadmap from SEC to have convergence with IFRS that is the major impact of IAS implementation.

Financial Report

Introduction

The conceptual framework of accounting relates to the preparation of financial statements in a general form for economic enterprises. It aims to provide a general framework for the development of new standards, to arbitrate between two standards in case of discrepancies, to interpret financial statements, and resolve accounting issues that were not addressed by the standards (Watts, 2003, p.47). IFRS and GAAP are two most important frameworks currently in use by many countries. IFRS is more conceptual (i.e., principle-based) than current U.S.GAAP, with little application guidance. U.S. GAAP is great rules-based, with specific application guidance (Alan and Susan, 16-24). Consequently, the use of IFRS requires relatively more reliance on judgment, and less reliance on detailed rules. IFRS requires management to disclose more information about estimated amounts used in the preparation of financial statements than U.S. GAAP does. The conceptual framework distinguishes twelve conventions:

1. Convention of the entity.

2. Convention of the monetary unit.

3. Convention of the periodicity.

4. Historical cost convention.

5. Convention for the realization of income.

6. Convention of matching costs to products.

7. Convention of objectivity.

8. Convention of consistency of methods.

9. Convention for complete details.

10. Convention caution.

11. Convention of materiality.

12. Convention of the substance over form.

Case Analysis (Findings)

The conceptual framework of financial accounting is the reference structure theory which supports and guides the development of accounting standards. The framework concept is a set of objectives, basic concepts and elements that with one another, bonds of coherence and complementarity. It aims to help:

Develop consistent standards that can facilitate the production of data and Financial states

Arbitration in case of divergence of apprehension or opposing interests and finding appropriate solutions;

The interpretation of financial statements;

The resolution of accounting issues were not addressed by the standards

Explain the accounting statements

Standardize the accounting concepts

Understand the accounting logic in order to disseminate it.

It can also serve as a reference to other institutions. The conceptual framework is structured in the following hierarchy:

The first level, setting forth the users, their needs and goals of financial statements.

The second level, the basic concepts include: qualitative characteristics of information contained in financial statements; the underlying assumptions and accounting ...