Name: Chun Ho Hui
Student ID: na20150418
Case Study 1
1. Explain why principles-based standards require a conceptual framework.
A: Conceptual framework can be defined as “an attempt to define the nature and purpose of accounting” (Team, 2015).
Conceptual framework is essential for principle-based standards because it lays out a fundamental structure for principles-based standards. Setting the standard on and relate to an established body of concepts and objectives, enable FASB and IASB to “issue more useful and consistent standards over time” (Essays, 2013). For any future developments or armaments on the standards, the framework will ensure the changes will be within its …show more content…
In a staff paper of IFRS Foundation has also mentioned the purpose of the conceptual framework is to “assist the IASB to develop and revise IFRSs, assist preparers to develop accounting policies when no IFRS applies to a particular transaction, event or condition and assist all parties to understand and interpret IFRS.” (IFRS, 2014).
It is still important to other parties like financial statements prepares, for them to understand the idea behind standards or to see it as a reference point of accounting standard setting in their own organization. The staff paper (IFRS, 2014) has reported that some respondents replied “The Conceptual Framework facilitates a common understanding of basic principles or concepts of financial reporting among all those who use the Standards.” So in other words, the conceptual framework is to give rational for the standards so that the financial statements prepares can gain a higher level of understanding.
In summary, the conceptual framework is more important to IASB than other parties as all of the standards will need to develop by the framework itself. Other party might refer it in some cases but in general cases they will be using the standard on a daily basis.
4. What is meant by a 'cross-cutting' issue? Suggest some possible examples of cross-cutting issues.
A: Cross-cutting issues are commonly defined as topics which, by their very nature, have a strong impact on all operations in a given field and, therefore, must