Standard-Based Accounting - Essay Example

The paper "Standard-Based Accounting " is a great example of a finance and accounting essay. The endeavored by the scholars and accounting practitioners to move towards principle-based accounting is mostly favored by the convergence between FASB and IASB standards (Radebaugh 2014). The principle-based accounting can be defined as those standards which are based on economically relevant criteria which give a high level of comparability among firms and are very crucial in terms of predicting the future cash flow of a company (Alfredson et al. 2012). FASB published a discussion paper on whether people should move from standard-based accounting to concept and principle-based accounting. IASB always favor the conceptual framework based accounting.

Standard-based accounting brings several inconsistencies (Alfredson et al. 2012). Standards in most cases are perceived to be reactive instead of being proactive hence I agree with the argument that the development and use of a Conceptual Framework instead of accounting standards will help in solving the problem of inconsistency in the application of accounting in practice. Therefore, principles-based accounting methods should be adopted instead of rule-based standards. Discussion and Conclusion The conceptual framework organizes the premises and concepts that do underlie corporate accounting particularly financial accounting. The framework helps in providing the basis for accounting standards and, as a result, is expected to help in providing a better understanding of the standards and enhance foreseeability in their interpretation. Smith, Haniffa & Fairbrass (2011) states that the development of conceptual framework should be in a position of providing adequate definitions of concepts and measurements, the accounting conceptual framework is able to facilitate the classification of researcher's ideas, allowing the substantive understanding of the research concepts. Well-developed theoretical frameworks act as a bridge between the academician and financial statement users. Willmott, Puxty & Cooper (2012) in discussing the FABS conceptual framework, in their discussion, they consider that there are two main ways of developing a conceptual framework for accounting.