The conceptual framework of accounting provides the basis upon which accounting standards are set and interpreted, and the development of future standards. It also helps users of accounting reports to understand the basis on which the reports were prepared. The framework of accounting contains some qualitative characteristics such as usefulness, reliability, timeliness, completeness and comparability. This will help investors and other information users to assess the amount, the timing and the certainty of cash flows to the business (Biondi, et al, 2011). Other principles, such as the going concern, allow the business transactions to be reported on the historical values, except in instances where the business may not be able to operate in the foreseeable future.
Accounting standards are essential to eliminate false information as well as to ensure homogeneity of information. The standards are expected to serve as social norms supporting measurement, recognition and the disclosure system. Management may have some reasons to disclose private information about the business, such as to avoid investor...
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...s. Also, a body that made a persuasive lobby for instituting single purpose and universal international accounting standards is the International Organization of Securities Commissions (IOSCO), the world’s securities markets regulator. The body asserts that inconsistent, nationally imposed accounting standards often lead to ambiguity for investors in reading financial reports (Zhang and Andrew, 2014). The need for uniform and strong financial reporting standards cannot be over emphasized.
In conclusion, the current state of the conceptual framework of IFRS needs some revision to incorporate certain issues as discussed, which will pave way for the harmonization of the IFRS with other national standards, such as the US. The revised framework will help in the disclosure of relevant value enhancing information to help investors and other users to make economic decisions.
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