Conceptual Framework _ The setting

• Conceptual Framework


  Assists the MASB to develop MFRS Standards based on consistent concepts<|>Assists preparers to develop consistent accounting policies<|>Assists all parties to understand and interpret the Standards
• Purpose of the Conceptual Framework

  • Contribute to transparency by enhancing the international comparability and quality of financial information
  • Strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money
  • Contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation
• Need for a conceptual framework


  • Two or more methods of accounting are accepted for the same facts
  • Less-conservative accounting methods are used rather than earlier, more conservative methods
  • Reserves are used to artificially smooth earnings fluctuations
  • Financial statements fail to warn of impending liquidity crunches
• Objective of general purpose financial reporting

  To provide financial information useful to the users in making decisions about buying, selling or holding equity and debt instruments, providing or settling loans and other forms of credit, or exercising rights to vote on, or otherwise influence, management's actions that affect the use of the entity's economic resources
• Information about reporting entity economic resources and claims

  • Provides information about the financial position of a reporting entity, which is information about the entity's economic resources and the claims against the reporting entity
  • Provides information about the effects of transactions and other events that change a reporting entity's economic resources and claims
• Material elements to be considered

  • Economic resources and claims
  • Changes in economic resources and claims
  • Financial performance reflected by accruals accounting
  • Financial performance reflected by past cash flows
  • Changes in economic resources and claims not resulting from financial performance (management stewardship)