Education: Fasb 12345

FASB and the International Accounting Standard Board are working closely together to develop a Conceptual Framework. The goal is developstandards that are objectives-based, internally consistent, and internationally converged. The Conceptual Framework is structured theory of accounting and states the scope and objective of financial reporting, identifies and defines the characteristics of financial information such as relevance and reliability. Conceptual framework is a principles and rules of recognition consist measurement to measure and report economic transactions, events, and arrangements in financial statements and accounting principles and assumptions that guide recognition and de-recognition.

Fundamental qualitative characteristics, relevance and faithful representation allow for decision usefulness to users and boards. Information that is capable of making a difference in decisions made by financial statement users is relevant. The three components of relevance are:

• Predictive Value – information that should help users form expectations about the company and the economics of the company

• Confirmatory Value – information that provides feedback from the users and company to confirm or correct prior predictions and expectations

• Materiality – refers to the nature and magnitude of an omission or misstatement of accounting information that would influence the judgment of a reasonable person relying on that information

Faithful representation is when the words and numbers accurately predict the economic substance of what they purport to represent. The three components of faithful representation are:

• Complete representation – provides a user with full disclosure of all information necessary to understand the information being reported, with all necessary facts, descriptions, and explanations

• Neutral representation – not biased, slanted, emphasized or otherwise manipulated to achieve a pre-determined result or to influence users’ behavior in a...