Benefits Of The Conceptual Framework For Preparers And Users Of Financial Statements

A. Discuss the benefits of the conceptual framework to preparers and users of Financial Statements.
a. Preparers
There are two different approaches to be applied in order to determining profits¬. These approaches are the asset/ liability approach and the revenue/ expense approach. The NZ Framework as well as most conceptual framework uses the asset/ liability approach. This framework assists preparers determining definitions of assets and liabilities and the definitions of all the other elements flow from them such as expenses, income, and equity. These are crucial to ensure financial statements of preparers to be consistent, objective, and qualitative. Addition, the conceptual framework can be helpful applied in cases having no relevant accounting standards or other guide exist, and having conflicts of benefit. This framework also provides a basis for the prediction and explanation of accounting behavior and events. Finally, the conceptual framework is a measure to assess the quality of preparers, therefore, it can improve their competency.

b. Users
There are several types of users, however, the primary users of financial statements are investors, lenders, and other creditors. Therefore, the conceptual framework makes financial statements consistent and logical. In addition, with this framework, users gain more benefits when using financial statements because these users made clearly aware and able to acknowledge departure from the framework set out. Meanwhile, if without the conceptual framework, interest groups often put pressures on the standard setters to lead to promulgate haphazard and ambiguous rules and guidelines. Users also make better decisions because according to the conceptual framework, information in financial s...

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...ith IFRS, these statements only examine these assets if they are able to be associated with the future interest.
8. GAAP allows minority interests (usually ownership positions by remarkable but not majority investors) to be listed in equity as a separate line item instead of in liabilities as under IFRS.
9. With GAAP, deferred taxes are classified as both current and non – current and footnote requirement is unnecessary to enclose information which describe the temporary differences between amounts that are able to be recovered in 12 months from the date of balance sheet and those requesting in over 12 months. However, under IFRS, these taxes are only included as non – current on the balance sheet and this footnote is required.
10. Under GAAP, current and non – current asset and liability items are divided, while these items are requested to be segregated with IFRS