Conceptual Framework And Why Is It Needed Accounting Essay

Conceptual Framework And Why Is It Needed Accounting testifyAccording to FASB, the abstract mannequin is a recollective system of interrelate objectives and fundamental concepts that prescribes the nature, function, and limits of monetary business relationship and coverage and that is expected to lead to ordered guidance. It is intended to serve the public interest by providing structure and commission to financial accounting and notifying to facilitate the provision of unbiased financial and related information. In short, abstract framework establishes the concepts that underlie financial reporting and it serves as a guidance to f blue consistently from an objective by showing a set of theory of accounting with concepts which atomic number 18 hustling by a hackneyedized- stage setting board. Elliott Elliott, 2009 stated that it excessively determines bounds for judgement in preparing financial statements as it increases financial statement users understanding of, a nd confidence in, financial statements and enhances comparability.Standard settings ar originationd on individual or personalized concept. However, with the presence of conceptual framework, more useable and more consistence pronouncements pull up stakes be subjectd over time and thus, a coherent system allow be developed. Another need of conceptual framework is that, profession users should be able to more quickly solve new and emerging practical problems by referring to an populateing framework of basic theory.All regulatory bodies befool been flayed because they choose used piecemeal approaches, solving one accounting issue at a time. Observers have alleged that not enough clean rationality has been used in the process of accounting policymaking. Again and again, critics have cited a need for a conceptual framework. (Horngren 1981, p.94)Body the argumentHines (1989, p.89) argues that conceptual frameworks are a strategic manoeuvre for providing legitimacy to banner- setting boards during periods of competition or threatened presidency interposition. The basis of Hines argument is that standard-setting boards they established concepts much(prenominal) as objectivity, reliability or neutrality to act as a curriculum to legitimate its profession. As one of the main obstacles against which accountants have continually had to exertion in their professionalization quest, has been the threat of an apparent absence of a formal body of accounting knowledge, and that creating the perception of possessing such knowledge has been an important single-valued function of creating and reproducing their social identity as a profession. This could thus lead to the intervention of the outsiders such as the disposal, due to its instability. However, the concepts or known as conceptual framework pop the questions are created to sustain the perception that financial accounting professions has been, or at the very least, is capable of having a formal knowled ge base from which practices and standards derive.This could be why some researchers believe that conceptual framework could foregather another more political role, in reducing the threat of presidential term intervention. It is said to be a strategic manoeuvre for providing legitimacy to standard setting boards because it assist in socially constructing the appearance of a coherent differentiated knowledge base for accounting standards.These projects however still remained to exist and are continually undertaken by professionals even if they have generally failed to master their stated functional purposes. This could explain why a conceptual framework does not exist in countries where governmental agency is in perpetrate of standard setting. Countries such as the United Kingdom, United States of the States, Canada and Australia were some of the countries which first-year off developed the national accounting conceptual framework and these are the countries where standard sett ing has pretty much been delegated to the accounting profession. These professional accountants have succeeded to a substantial degree in their professionalization project where they are largely self-regulated. On the other hand, conceptual framework projects have not been undertaken in France, Germany or Japan where accounting rules is largely determined by government legislation. Stated by Hines, government legislation of accounting procedures does not pack the authority and legitimacy of an image of a coherent theoretical foundation. (Hines, 198986)The register of conceptual frameworks does appear to provide some support for Hines perspective. Peasnell (1982) have discussed v conceptual framework projects which are undertaken in the United Kingdom, United States of America and Canada which each circumstance suggests that they were strategic responses undertaken by accounting bodies at quantify of threat to their legitimacy or during periods of competition or threatened gover nment intervention.First of the five projects was the formation of the Accounting Principles Board (APB) by the American Institute of Certified Public Accountants (AICPA) in the 1959 which resulted mounting professional and reasoned criticisms on both the quality of corporate reporting practices and the early attempts of the AICPA to assuage matters. (Peasnell, 1982, p.244) APB was criticised by government and also being rejected by the constancy. However, the criticisms were so suppressed about five years later after the cheers of APB Statement No.4 (APBS4) which states Basic Concepts and Accounting Principles Underlying monetary Statements of Business enterprises. (Peasnell, 1982, p.245)However, the failed results from the first project had doubled. The second project was the FASB which was established as recommended by the husk Report (AICPA, 1972) and also the publication of Trueblood Report (AICPA, 1973). The latter in effect, reach over to the newly established FASB, w as also criticised and opposed by the industry and was not acted upon by the FASB.According to Peasnell (1982), the third conceptual framework project was bespoke in the United Kingdom by the Accounting Standards commission Committee as The Corporate Report (ASC, 1975). As discussed by Hopwood (1988), this report is an attempt to outline some of the possible implications for corporate reporting of a change in the social and political environment. However, there are no significant challenge to its legitimacy and thus, this report was treated with indifference.The forth conceptual framework attempt discussed is the conceptual framework established by the Financial Accounting Standard Board (FASB). It is established in response to the criticisms of the professions standard setting and was subject to the onus of demonstrating its authority and legitimacy to set standards. It has bonny apparent that the accounting standards being set could lead to significant sparing consequences, bot h to business and even nationally.The final conceptual framework projects discussed by Peasnell (1982) is bespoke on behalf of the Canadian Institute of Chartered Accountants (CICA, 1980) and the work was commenced at the time when the body was under threat for reform and criticisms of accounting standards setting in Canada. The circumstances to counter these issues are that they are used as a strategic resource in competition with other groups which are pursuing professionalization and threatening the autonomy and monopoly of entrenched organisations.ConclusionThe conceptual framework first started off by emerging in the accounting area as a solution to the inconsistencies of standards which had led to a low legitimacy of standard setting bodies. It had eventually becoming a useful tool for account preparers when preparing reports. However, as defended by Hines and some other authors such as Peasnell, 1982, its main function could be a political one. It has been argued and criticis ed endlessly that conceptual frameworks are a strategic manoeuvre for providing legitimacy to standard-setting boards during periods of competition or threatened government intervention and the history of the development of conceptual frameworks which supports Hines position has proved so.Moreover, according to Peasnell (1982), the moreover way to prove that standards are developing in a fair, logical and highly professional expression is by having both responsibility and power of developing standards delegated to the same body, homogeneous the IASB. Establishing consistent principles will constitute guidance for the production of standards. It is not only a technical tool for the standard setter but also a way of preserving its independence. Lastly, with consistent principles, the standard setter is supposed to be better armed to promote its standards and to avoid lobbying pressure.