Accounting Conceptual Framework

Kathleen A. Kaminski

Jon R. Carpenter

The University of South Dakota

ABSTRACT

In 2002, the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) formally agreed to work toward convergence of their respective promulgated accounting principles. Both the FASB and IASB purportedly rely upon their own respective conceptual frameworks to guide their standard-setting deliberations. This study focuses on the conceptual frameworks previously issued by the FASB and IASB. Specifically, this study examines the four active phases of the boards’ framework project: objectives of financial reporting and qualitative characteristics of accounting information; definitions of financial statement elements; measurement bases; and the reporting entity concept. Results indicate that progress is being achieved in reconciling differences between the current frameworks. While the joint project remains a work-in-process, the resulting new and improved conceptual framework will be the foundation for development of principles-based standards that are internally consistent and internationally converged.

Keywords: accounting conceptual framework, qualitative characteristics, FASB, IASB

INTRODUCTION

The Financial Accounting Standards Board (FASB) began development of an accounting “conceptual framework” in the mid-1970s. Between 1978 and 2000, it issued seven pronouncements entitled Statements of Financial Accounting Concepts (SFAC). These were designed to prescribe “the objectives and concepts that the FASB will use in developing standards of financial accounting and reporting” (FASB 1978, 6). The conceptual framework was to be used as a guide in the development of consistent accounting standards, hopefully leading to a more coherent set of accounting principles to aid practice. Components of the framework included objectives of financial reporting, qualitative characteristics of financial information and elements of financial statements,...