The conceptual framework of the IASB: The conceptual framework of the IASB: Predicts and explains the nature, function and limits of financial accounting and reporting. Prescribes the nature, function and limits of financial accounting and reporting. Is a positive theory of accounting. Observes and predicts the nature, function and limits of financial accounting and reporting.
Question
The conceptual framework of the IASB:
The conceptual framework of the IASB:
Predicts and explains the nature, function and limits of financial accounting and reporting.
Prescribes the nature, function and limits of financial accounting and reporting.
Is a positive theory of accounting.
Observes and predicts the nature, function and limits of financial accounting and reporting.
Solution
The conceptual framework of the International Accounting Standards Board (IASB):
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Does not predict and explain the nature, function, and limits of financial accounting and reporting. Instead, it provides a structure and a set of fundamental principles for the development of accounting standards.
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It does prescribe the nature, function, and limits of financial accounting and reporting. The framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.
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It is not a positive theory of accounting. A positive theory of accounting attempts to explain and predict actual accounting practices, which is not the primary purpose of the IASB's conceptual framework.
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It does not observe and predict the nature, function, and limits of financial accounting and reporting. As mentioned earlier, its main purpose is to assist the IASB in the development of future International Financial Reporting Standards (IFRS) and to promote harmonization of regulations, accounting standards, and procedures relating to the presentation of financial statements.
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Which is a purpose of the Conceptual Framework?Group of answer choicesTo assist all parties to understand and interpret the StandardsTo assist the IASB to develop IFRS based on consistent conceptsTo assist preparers to develop consistent accounting policy when no Standard applies to a particular transaction or when Standard allows a choice of accounting policyAll of these can be considered a purpsoe
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What is the authoritative status of the Conceptual Framework?Group of answer choicesIn the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and faithfully representedIn the absence of a standard or an interpretation that specifically applies to a transaction, the Conceptual Framework shall be followedThe Conceptual Framework has the highest level of authorityThe Conceptual Framework applies only when the IASB develops new standards
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