Conceptual Framework

Question 1

What is a Conceptual Framework?

Answer 1

A coherent system of interrelated objectives and fundamentals that is expected to lead to consistent (accounting) standards

Question 2

Why is a Conceptual Framework needed?

Answer 2

Without a CF:
- Accounting standards would be developed in an ad hoc manner
- There would be limited consistency between accounting standards
A CF can:
- Enhance the credibility of the profession, standard setting and financial statements
- Can assists the preparers of financial statements by interpreting the information provided in specific standards

Question 3

How does Chapter 1 of the CF (objective of general purpose) identify the users of financial information?

Answer 3

• Primary users: existing/ potential investors and existing/ potential lenders/ other creditors
• Others: Employees, customers, governments and their agencies, the public etc.

Question 4

How does Chapter 2 of the CF (qualitative useful info) identify levels of usefulness?

Answer 4

At two levels:
- Fundamental