How the International Accounting Standards Board in developing accounting

How does the Conceptual Framework for Financial
Reporting and Accounting Standards are facilitating the reporting of “relevant
and faithfully represented” information in the entity’s financial statements? Firstly,
according to a review by Arjan Brouwer et al. (2015), “Conceptual Framework
(CF) is intended to be a coherent conceptual basis for the International
Accounting Standards Board in developing accounting standards, and the new definitions and recognition criteria for assets
and liabilities as proposed in the discussion paper are designed to provide
clearer guidance to solve issues in areas such as leases, rate-regulated activities
and non-financial liabilities (IASB 2012)”. Initially, the IASB and FASB
initiated a project whereby they both agreed to work jointly on future
standards to align existing ones. This started with an objective that the
conceptual framework project was to remove existing differences between the two
frameworks, make improvements and fill in the gaps between them. Thus, when we
facilitate relevance in financial accounting it means that relevance is a theory
that the information generated by an accounting system should impact the
decision-making of someone using the information. The theory can involve the
content of the information and its timeliness, both of which can relate to
decision making. Specifically, information that is provided to users more quickly
is considered to have an increased level of relevance (Steven Bragg, 2013). On
the other hand, for the financial report to be faithfully represented it needs
to have three attributes. The financial report should be complete, error-free
and unbiased. By complete meaning that there should be no information omitted in
the financial report, while the report should also be error free so that it
presents a fair view of the organization. The business should also be unbiased
where it tries to amplify its result to give wrong impressions towards
organizations analyzing their financial report. When the objectives of the
financial report are clear, there will be quality information produced that are
relevant and faithfully represented, then only we can determine or calculate
the future cash inflows. It will be easier to determine future cash inflows
when the information is utilized. In this essay, I will critically evaluate how
the conceptual framework for financial report and accounting standards are
facilitating the reporting of ‘relevant and faithfully represented’ information
in the entity’s financial statements. 

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