• Register
Return to: Home > News > IASB revises Conceptual Framework

IASB revises Conceptual Framework

The International Accounting Standards Board (IASB) has revised its Conceptual Framework for Financial Reporting that underpins IFRS Standards.

The Conceptual Framework sets out the fundamental concepts of financial reporting that guide the IASB in developing IFRS Standards. The framework is in place so the IFRSs are conceptually consistent and that similar transactions are treated the same way.

It aims to assist companies in developing accounting policies when no IFRS Standard applies to a particular transaction and it helps stakeholders to understand the IFRSs better.

The definitions of asset and liability have been refined for the purpose of clarity which has therefore led to income and expense to be redefined to reflect this change.

Asset has been clarified and is now defined as the economic resource and not the succeeding inflow of economic benefits.

Liability has been clarified so it is clear it is the obligation to transfer the economic resource and not the ultimate outflow of economic benefits.

The IASB stated in its Conceptual Framework Project Summary that this is due to make the recognition of assets more comprehensive as opposed to an increase in volume of the assets recognised. This is to give a better summary of an entity’s financial situation.

Other revisions to the Conceptual Framework include: a new chapter on measurement; guidance on reporting financial performance; and clarifications in important areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.

Amendments have been made to certain IFRSs which explicitly referenced the previous Conceptual Framework so that they now reference the revised Framework. These changes are not likely to have a significant impact on the IFRSs affected.

There are a few exceptions to this when the updated Conceptual Framework would affect IFRSs significantly. When following IFRS 3, Business Combinations, acquirers will be required to refer to the definitions of asset and a liability of the previous Conceptual Framework.

The updated Conceptual Framework will also not currently alter development of accounting policies for regulatory account balances applying IAS 8 Accounting Policies, Changing in Accounting Estimates and Errors to avoid entities revising those accounting policies twice within a short period of time.

The IASB will start using the revised Conceptual Framework immediately, whereas companies will use it from 2020.

 

By Joe Pickard

Top Content

    The importance of international audit standards

    Addressing members of the Institute of Chartered Accountants in England and Wales (ICAEW), the US Securities and Exchange Commission (SEC)’s chief accountant, Wesley Bricker, expressed his views on the importance of high-quality audit work. An edited version of his speech is given below

    read more

    IFRS: Presenting a firm foundation

    Jonathan Minter speaks to Nick Anderson, board member of the IFRS Foundation, about the body’s current objectives and initiatives, including the primary financial statements project and the handling of joint ventures

    read more

    Reporting on culture and the business of trust

    Following a number of high-profile failures, trust in business and accounting is at a low point. To discuss how the situation could be improved, the Charted Institute of Management Accountants (CIMA) hosted a conference on improving trust levels. Jonathan Minter reports

    read more

    Widening the responsibility business net

    The 17th Responsible Business Summit Europe featured a number of speakers addressing the wider implications of looking beyond just financial data. The Accountant presents selected highlights

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.