The IASB Framework Its Formation And Objectives Accounting

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The old conceptual model known as Model for the Preparation and Presentation of Financial Statements was issued by the International Accounting Standards Committee ( IASC ) in 1989. In April 2001 the model was adopted by International Accounting Standards Board ( IASB ) . It chief function was to aid external users in planing the readying and presentation of fiscal statements ( Accounting web, 2005 ) .

A Framework chiefly has 4 chief purposes- the first and foremost is in specifying the aims of fiscal statements. These include supplying information on fiscal place, ability to notice on the organisation ‘s fiscal public presentation and to find alterations in either of it. The 2nd aim is in placing utile features of information. Third, it defines the basic facets of the fiscal statements. And in conclusion, it provides constructs of capital care ( Rudy, 2008 ) .

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An analysis of the old model suggests that though the model was helpful in deciding many standard-setting issues it did confront troubles excessively. See an illustration for the definition of liability. The IAS37 and Statement 5 provinces that a “ eventuality or proviso should be recognized merely if a present duty arises from a past event thereby governing out premature acknowledgment of militias for possible losingss from events that have non yet occurred ” ( Halsey, 2005 ) . This helped both IASB and FASB decide that derivative instruments ensuing in liabilities must be recognized. However, the definition has been unequal for the boards in “ acknowledging the duty from past events ” in certain instances such as environmental liability. At the same clip the current definition made it hard for the boards to separate between grosss and liabilities. An illustration of this would be when payments are made in progress for a service or merchandise ( Halsey, 2005 ) .

Though the IASB Framework is helpful in readying of fiscal statements, the Framework can be considered to be less good in puting criterions than ab initio planned to be particularly as a comprehensive counsel for the standard scene issues. However, the qualitative feature which includes comparison, relevance, dependability and comprehensibility has helped users in construing fiscal studies ( Attril ) .


There are a figure of differences in the criterions used in US GAAP and IFRS. For the Statement of Income extraordinary points are non segregated under IFRS but for GAAP they are mentioned below the net income. The theoretical accounts adopted for Consolidation are dissimilar excessively. IFRS follows a Control Model whereas GAAP stick to Risk and Rewards theoretical account. In the instance of Inventory, IFRS consents the usage of FIFO but forbids the usage of LIFO since the method consequences in lower gross net income there by leting the company to be taxed less. However GAAP permits the usage of both LIFO and FIFO. Finally under Development Cost, IFRS allows the cost to be capitalized if certain standards are met but on the other manus GAAP states it to be considered as disbursals ( UK Essay ) .


The new IFRS Framework was developed jointly by IASB and FASB and was accepted by IASB in September 2010. This was due to two grounds. First motivation was to update the accounting criterions of the IASB model. An amendment was necessary to undertake this issue. The 2nd ground takes in to account the effects of globalisation which made boundaries to drop and allowed organisations to put up offices in different states. But these companies in different states had to do fiscal studies in assorted criterions depending on the accounting criterions followed in the state. This turned out to be debatable. Hence the demand for a individual set of accounting criterions was necessary. Besides, in the U.S, companies required to fix fiscal statements adhering to U.S Securities and Exchange Commission ( SEC ) had been asked to replace the U.S General Accepted Accounting Principles ( GAAP ) which was a regulation based theoretical account to International Financial Reporting Standards ( IFRS ) which is rule based. This alteration is expected by the beginning of 2014 which means finally all companies in U.S will hold to follow IFRS. All these led to the development of a new Conceptual Framework ( UK Essay ) .

The primary aim is to do statements that are convergent taking to a individual set of high degree planetary accounting criterions and to decide any accounting differences that exists. The intent besides includes identify users and to supply them information that is of most importance ( Dauphalex, 2011 ) .


In general, the Conceptual Framework has helped corporate accounting in forming its implicit in constructs. Furthermore, the offering of a conceptual footing for the accounting criterions has helped advance a better grade of apprehensiveness of the criterions and better the foresee ability of readings. Most significantly, it helped users of fiscal statements to avoid unwanted cost that might incur when construing accounting criterions.

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The IASB Framework Its Formation And Objectives Accounting. (2016, Nov 28). Retrieved from

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