The paper "Why Principles-Based Standards Require a Conceptual Framework" is a perfect example of a business assignment. In accounting, there exists a range of reasons why principles-based standards require a conceptual framework. Some of the most prevalent reasons include the following a conceptual framework develops the guidelines to be deep-rooted in the fundamental notions instead of just being a cluster of conventions. A conceptual framework also helps IASB and FASB to realize coherent reporting and accounting basis of standards. It’ s through a conceptual framework that consistency between standards is maintained. Specific accounting standards where consistency is maintained is between IFRSs, IASs and ISA.
Maintaining consistency between these standards also ensures past, and future decisions are also reliable, by preventing the drawing of different conclusions on events that are considered similar. A conceptual framework also ensures that the principle-based standards reflect the decision of the board members setting the standards rather than the individual idea. The framework also works to ensure there is some consistency between the preparation of financial statements, financial reporting, and interpretation of various information and entities in the financial statements.
The framework acts as written evidence that can be considered a constitution for financial reporting and accounting as well as providing references to various accounting aspects and issues (Jones, & Wolnizer, 2003). 2. Why is it important that the IASB and FASB share a common conceptual framework? Sharing of a common conceptual framework between IASB and FASB will permit the updating, modification, merging and conclusion between the existing FASB concept guidelines and statements and the IASB guideline framework. It should be noted that functionality frameworks of both IASB and FASB were generated in the 1970s and 1980s and thus considering the number of years they have been operational, as well as the changing structures experienced in the accounting field over the same years, calls for an updating and modification to be made.
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