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Provide a 8 pages analysis while answering the following question: FINANCIAL REPORTING & ANALYSIS / IASB Conceptual Framework for Financial Reporting. Prepare this assignment according to the guid
Provide a 8 pages analysis while answering the following question: FINANCIAL REPORTING & ANALYSIS / IASB Conceptual Framework for Financial Reporting. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. The statement of Financial Accounting Concepts (SFAC) highlights five main qualitative elements of accounting information: understandability, relevance, compatibility, and consistency. The conceptual framework was developed with the sole purpose of providing the pillar for principle-based accounting standards. In spite of these objectives, the Securities and Exchange Commission (SEC) has found fault on the accounting standards setting board for becoming overly rules-based, which opens an avenue for the organization of transactions in the firm’s favor. In addition, accounting experts argue that the shift towards rules-based standards is as a result of insufficiencies in the accounting conceptual foundation (Pike and Chui, 2012, p.77).
Nobes asserts that the urgent need for rule-oriented accounting principles is a direct consequence of the FASB attempting to push for a fit between accounting standards and a conceptual framework that is under-developed (Pike and Chui, 2012). The thirst for a strong conceptual framework is not only needed for the establishment of principle-oriented accounting standards, but also for the creation of international accounting rules (Kamininski and Carpenter, 2011, p.17). Most developed economies have recognized that there is need and benefits for coming up with an International Financial Reporting Standards. The IASB’s conceptual framework falls short of guidelines for setting standards (Pike and Chui, 2012, p.80).
The IASB’s conceptual framework for the preparation of financial statements is a brief and single document containing only 110 paragraphs. Drafted in 1989, the document’s contents express a firm affinity with the FASB’s previous works, though there are some underlying differences in details.