Manners of Development of Conceptual Frameworks - Research Paper Example

Introduction The matters explored in this write- up are the ‘manners of development of conceptual frameworks’ as adopted by accounting standard setting bodies; importance of valuation and economic income concepts in terms of laid down accounting standards; and the analysis of presentation of comprehensive income as envisaged by amended IFRS 1. The assets- liability approach of the conceptual framework adopted by IASB for designing international accounting standards, which is akin to the purposes of the framework implemented by FASB, has been explored in depth under this study.

Valuation concept, as adopted by both IASB and FASB under circumstances when historical values being replaced with fair market values, has been examined to find out the effects of such valuations. The concept of ‘economic income’ has gained importance under prevalent economic instability around the world. Accordingly an effort has been made to review the capabilities of standards to measure the financial income, calculated using available standards, in terms of economic income. IFRS 1 has been amended to make ‘comprehensive income’ more presentable and useful to users of financial statements.

These amendments have been critically examined in order to evaluate the achievements. ConclusionIASB has adopted asset- liability theory, similar to the approach adopted by FASB in its framework, to develop the conceptual frame. This implies that the objectives of standards would only be to satisfy the needs of users of financial statements. Standards are not set to measure the management performance, though such measurement is incidental on application of standards. This is rather a lopsided approach and not a comprehensive framework helping to set the standards.

Fair value application is a welcome approach and in situations where fair values are not available or measureable, the proposal to use present value is a refreshing modern idea. Suddenly economic income concept has taken a central stage in world economies. The abilities in IASB and FASB standards to evaluate financial income in terms of economic income, particularly when presenting effects of non- owners equity on the comprehensive income, reveals the flexible approach adopted in framing the standards.

Though bringing amendments in presentation of financial statements is an effort in right direction and with a purpose, but the very first effort to amend IFRS 1 has proved to be infertile. Amendments have not brought any value additions to the presentation of financial statements. Mere shifting of information from one statement to other is just a cosmetic approach.Word Count: 402