Financial Reporting:
Its Conceptual
Framework
Lesson 1
COPYRIGHT © 2010 South-Western/Cengage Learning
,2 Topic learning outcomes
At the end of this topic the student shall;
Appreciate importance of conceptual framework as it
relates to accounting
Know the users of financial statements and their
information needs
Understand the recognition criteria and how it provides a
basis of accrual accounting.
Identify critical characteristics of accounting information.
Be aware of essential assumptions, principles constraints
that underlie GAAP.
Identify elements of financial statements
,3 CONCEPTUAL
FRAMEWORK
The conceptual framework is like a
constitution.
It is a statement of generally accepted theoretical
principles, which form the frame of reference for
financial reporting.
These theoretical principles provide a basis for the
development of new accounting standards and the
evaluation of those already in existence.
, Objectives-Oriented
4
Principles
The SEC has recommended that future
accounting standards should not follow a
rules-based, nor principles only approach,
but should be “objectives-oriented.”
Should be built on an improved and
consistently applied conceptual framework
Clearly state the accounting objective
Minimize exceptions
Avoid the use of bright-line tests
Its Conceptual
Framework
Lesson 1
COPYRIGHT © 2010 South-Western/Cengage Learning
,2 Topic learning outcomes
At the end of this topic the student shall;
Appreciate importance of conceptual framework as it
relates to accounting
Know the users of financial statements and their
information needs
Understand the recognition criteria and how it provides a
basis of accrual accounting.
Identify critical characteristics of accounting information.
Be aware of essential assumptions, principles constraints
that underlie GAAP.
Identify elements of financial statements
,3 CONCEPTUAL
FRAMEWORK
The conceptual framework is like a
constitution.
It is a statement of generally accepted theoretical
principles, which form the frame of reference for
financial reporting.
These theoretical principles provide a basis for the
development of new accounting standards and the
evaluation of those already in existence.
, Objectives-Oriented
4
Principles
The SEC has recommended that future
accounting standards should not follow a
rules-based, nor principles only approach,
but should be “objectives-oriented.”
Should be built on an improved and
consistently applied conceptual framework
Clearly state the accounting objective
Minimize exceptions
Avoid the use of bright-line tests
