Accounting Theory Conceptual Framework

Question: Discuss about the Accounting Theory for Conceptual Framework. Answer: Introduction: The conceptual framework helps IASB in issuing various pronouncements that is of immense utility and consistent in nature. Therefore, it helps in building standards that provide strong result. The presence of conceptual framework helps to implement standard that is uniform in nature and result in standard setting. This conceptual framework helps in framing policies and is not related to any personal point of view. Therefore, the problem of different conclusion is omitted altogether. Moreover, it helps in resolving accounting (Boundless, 2016). The main objective of setting a conceptual framework lies in the fact that it helps to provide immense support to the accounting standard, it aids in resolving the disputes of the accounting and guide as a fundamental principle. The need for conceptual framework is essential as it establish objectives in terms of financial objectives, fundamental accounting, as well as other concepts. It provides means to ascertain accounting information trace the financial happenings and report them. It enhances the generation of accounting information that is useful in nature to those who want to make an investment, as well as credit decision in a manner that helps to know the economic resources of a company, the claim and the variations in them (Landsman et. al, 2011). The framework even provides reasonable assumption in the competence level on the user part in knowing the matter of accounting. Along with the advantages, there are various problems and criticism associated with the conceptual framework. Firstly, there appears a big difficulty when it comes to setting up of the framework. Countries that are rich, as well as developed can have the framework with ease and flexibility while the poor and developing countries have to face an up heal task in terms of implementation (Whittington, 2008). It is time-consuming and expensive in nature. Secondly, the conceptual framework when providing for the accounting practices standard might lead to rigidity. It might be difficult to pitch new ideas. Thirdly, conflict can happen between the framework and the accounting standards because prior to the introduction of the CF there was a different system in practice that changed. Moreover, the framework might not suit the taste of every party and it might lead to a beneficial act only for the few. Further, it is difficult to know that whether the framework will serve the process as is re quired (Brealey et. al, 2011). It is difficult to ascertain the final result of the framework and hence, difficult to predict. The effort might fail and the alternative approaches might not produce the same result as is needed thereby making a big difference. Moreover, the framework is introduced of having a uniformity in the practice but it might happen that the framework fails to establish a link between the selected country and its practice. In this scenario, the framework will not suit the operations (Boundless, 2016). Overall, it can be said that the result will depend on the practice and the country. A company can change methods and hence, a difference will arise. In short, it will fail to consider the changes and its impact. Hence, comparability and consistency might be disturbed in this scenario. References Boundless 2016, Reasons for a Conceptual Framework: Boundless Accounting, viewed 21 January 2017 https://www.boundless.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/the-accounting-concept-18/reasons-for-a-conceptual-framework-113-575/ Brealey, R., Myers, S. Allen, F 2011,Principles of corporate finance, New York: McGraw-Hill/Irwin. Landsman, W. R., Maydew, E. L., Thornock, J. R 2011, The information content of annual earnings announcements and mandatory adoption of IFRS, Journal of Accounting and Economics, vol. 53, no.2, pp. 34-54. Whittington, G 2008, Harmonization or Discord? The critical role of the IASB conceptual framework review, Journal of Accounting Public Policy, vol. 27, no. 6, pp. 44-56