The IFRS Framework

As described in the Introduction section of IFRS 2010 (Part A), the IASB has a Framework for the Preparation and Presentation of Financial Statements.

The FIRS Framework deals with the :

• objective of financial reporting
• qualitative characteristics of useful financial information
• reporting entity
• definition, recognition and measurement of the elements from which financial statements are constructed
• concepts of capital and capital maintenance

The intention of the Framework is to assist the IASB :

1. in the development of future IFRSs and in its review of existing IFRSs; and
2. in promoting the harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRSs.

In addition, the Framework may assist :

1. preparers of financial statements in applying IFRSs and in dealing with topics that have yet to form the subject of a standard or an interpretation
2. auditors in forming an opinion on whether financial statements conform with IFRSs
3. users of financial statements in interpreting the information contained in financial statements prepared in conformity with IFRSs
4. those who are interested in the work of the IASB, providing them with information about its approach to the formulation of accounting standards

The Framework is not an IFRS. However, when developing an accounting policy in the absence of a standard or an Interpretation that specifically applies to an item, an entity’s management is required to refer to, and consider the applicability of, the concepts in the Framework.

In a limited number of cases there may be a conflict between the Framework and a requirement within a standard or an Interpretation. In those cases where there is a conflict, the requirements of the standard or Interpretation prevail over those of the Framework.

Current Development of the IFRS Framework

In October 2004, the FASB and IASB added to their agendas a joint project to develop an improved, common conceptual framework that builds on their existing frameworks (that is, the IASB’s Framework for the Preparation and Presentation of Financial Statements and the FASB’s Statements of Financial Accounting Concepts).

As noted in the FASB website (read further : Conceptual Framework—Joint Project of the IASB and FASB), the objective of the conceptual framework project, a joint project of the FASB and IASB, is to develop an improved common conceptual framework that provides a sound foundation for developing future accounting standards. Such a framework is essential to fulfilling the Boards’ goal of developing standards that are principles-based, internally consistent, and internationally converged and that lead to financial reporting that provides the information capital providers need to make decisions in their capacity as capital providers. The new framework, which will deal with a wide range of issues, will build on the existing IASB and FASB frameworks and consider developments subsequent to the issuance of those frameworks.

The project is being undertaken in eight phases :

1. Phase A – Objectives and Qualitative Characteristics
2. Phase B – Elements and Recognition
3. Phase C – Measurement
4. Phase D – Reporting Entity
5. Phase E – Presentation and Dislosure, including Financial Reporting Boundaries
6. Phase F – Framework Purpose and Status in GAAP Hierarchy
7. Phase G – Applicability to the Not-for-Profit Sector
8. Phase H – Entire Framework

On 28 September 2010, the IASB and the FASB announced the completion of the first phase of this joint project to develop an improved conceptual framework for IFRSs and GAAP. Click here for more information.

Another references :

1. ICAEW - The Conceptual Framework for Financial Reporting
2. IFRS - Conceptual Framework