Conceptual Framework And Why Is It Needed Accounting Essay

Conceptual Framework And Why Is It Needed Accounting EssayAccording to FASB, the conceptual modelling is a pellucid system of co-ordinated objectives and fundamental concepts that prescribes the nature, function, and limits of pecuniary history and handleing and that is expected to lead to consistent counselling. It is intended to serve the public interest by providing structure and direction to financial accounting and reporting to facilitate the provision of unbiased financial and related information. In short, conceptual framework establishes the concepts that underlie financial reporting and it serves as a guidance to f commencement consistently from an objective by showing a set of theory of accounting with concepts which are prepared by a standard-setting board. Elliott Elliott, 2009 utter that it too determines bounds for judgement in preparing financial statements as it increases financial statement users understanding of, and confidence in, financial statements an d enhances comparability. stock settings are based on individual or personal concept. However, with the presence of conceptual framework, more useful and more consistence pronouncements will be electrical outletd over time and thus, a coherent system will be developed. Another need of conceptual framework is that, profession users should be able to more quickly solve new and rising practical problems by referring to an existing framework of basic theory.All regulatory bodies relieve oneself been flayed because they have used piecemeal approaches, solving integrity accounting issue at a time. Observers have alleged that not enough tidy 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 standard-setting boards during periods of competition or terror ened authorities intervention. The basis of Hines argument is that standard-setting boards they established concepts such as objectivity, reliability or neutrality to act as a platform to legitimate its profession. As one of the main obstacles against which accountants have continually had to struggle in their professionalization quest, has been the threat of an apparent absence of a formal body of accounting noesis, and that creating the perception of possessing such knowledge has been an important part of creating and reproducing their social identity as a profession. This could thus lead to the intervention of the outsiders such as the political science, due to its instability. However, the concepts or cognise as conceptual framework projects are created to sustain the perception that financial accounting professions has been, or at the very least, is capable of having a formal knowledge base from which practices and standards derive.This could be why some researchers believe that conceptual framework could play another more political role, in reducing the threat of government 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 distinguish 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 accomplish their stated usable purposes. This could explain why a conceptual framework does not exist in countries where governmental agency is in charge of standard setting. Countries such as the United Kingdom, United States of America, Canada and Australia were some of the countries which first developed the national accounting conceptual framework and these are the countries where standard setting has pretty much been delegated to the accounting profession. These professional accountants have succeeded to a substantial d egree 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 require the authority and legitimacy of an image of a coherent theoretical foundation. (Hines, 198986)The history of conceptual frameworks does appear to provide some support for Hines perspective. Peasnell (1982) have discussed pentad 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 times of threat to their legitimacy or during periods of competition or menace government intervention.First of the five projects was the formation of the Accounting Principles Board (APB) by the American pioneer of informed Public Accountants (AICPA) in the 1959 which resulted mounting professional and legal criticisms on both the quality of corporate reporting practices and the early attempts of the AICPA to remedy matters. (Peasnell, 1982, p.244) APB was criticised by government and also macrocosm rejected by the industry. However, the criticisms were then suppressed about five years later after the approval of APB Statement No.4 (APBS4) which states Basic Concepts and Accounting Principles central Financial 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 Wheat Report (AICPA, 1972) and also the publication of Trueblood Report (AICPA, 1973). The last mentioned in effect, handed over to the newly established FASB, was also criticised and opposed by the industry and was not acted upon by the FASB.According to Peasnell (1982), the third conce ptual framework project was bespoke in the United Kingdom by the Accounting Standards Steering 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 evidential 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 becoming apparent that the accounting standards being set could lead to significant economic consequences, both to business and even nationally.The final conceptual framework projects discussed by Peasnell (1982) is bespoke on behalf of t he 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. deathThe 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 criticised continuously that conceptual frameworks are a strategic manoeuvre for providing legitimacy to standard-setting boards during peri ods 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 only way to prove that standards are developing in a fair, logical and highly professional manner is by having both responsibility and power of developing standards delegated to the same body, like the IASB. Establishing consistent principles will constitute guidance for the production of standards. It is not only a technical tool for the standard typographer 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.