The Conceptual Framework

Proposed by the International Accounting Standards Board (IASB), the Conceptual Framework identifies and describes the concepts that underlie the preparation and presentation of financial statements for external users. The purpose of this Framework is to define the key terns and principles to ensure common understanding and application across international settings.

Purpose of the Conceptual Framework

There are 3 main reasons supporting the existence of the Framework:

1. Fewer Accounting Standards Having a Framework will enable the resolution of accounting problems without the need to issue an accounting standard on every occasion. This will result in fewer accounting standards and minimise problems of a 'standard overload'- a problem concerned with the time and costs involved in preparing General Purpose Financial Reports that must comply with a large number of accounting standards.

2. More consistent Accounting Standards All Accounting Standards will have to conform to the Framework, leading to more consistency between the standards.

3. Improved Communication With a Framework in place, there will be improved communication amongst accountants and between the Standard setting bodies as all parties use common definitions TheImproved communication