Developing a conceptual framework is an impossible possibility Essay - 3

Developing a conceptual framework is an impossible possibility - Essay Example It works on the determining the basis of theoretical theories, measurement of transactions (e.g. historical value) and their reporting lines to their end users (SA, 2011). Historical View in Conceptual Framework: The sophistication and excessive increase in businesses and accounting disclosures gave birth to the rules and regulations in accounting standards. A generalised approach was established to process the consistency, standardisation and accuracy of accounts based on reporting framework (Archer, 1993). The establishment of accounting framework board was to standardise the accounting practices and provide theoretical basis for measuring the financial reports. It was the earliest basis for establishment of conceptual framework by FASB for accounting concepts, reporting standards and objectives of business operations. The rise of financial scandals such as WorldCom (UK) and BBCI (UK) resulted in establishment of IASC (International Accounting Standards Committee) in 1989, which is responsible for presenting a framework for demonstration and preparation of financial records. It was later succeeded by IASB (International Accounting Standard Board) that is based on the conceptual framework by FASB since 2001. ... IASB can redefine the existing standards, converge, complete the implementations of standards through conceptual framework, and act as a development tool for the new accounting standards (Solomon and Solomon, 2005). A principle-based approach is a significant factor in implying the standards. It should not be just a mere collection of theoretical conventions but a consistent applicable principle that is comprehensive to be applied globally. The existing problem in converging the FASB and IASB is the conflict between revised and converged framework and reporting standards. The reporting standards have hierarchal priority over the framework, as they cannot be easily reflected in preparation of financial statements due to conflicts in concept and mere framework (FRC, 2011). The main debate for enforcement of conceptual framework is due to the consistency of accounting principles, which facilitates effective communication of assumptions, measurements, and reporting frame. It also reduces the impact of implied misrepresentations and excessive assumptions in the standards (Zeff, 1999, pp. 89-131). The converged standards need to be developed effectively to harmonise the accounting practises and procedures. The framework can increase or decrease the potential accounting treatments for a more diversified application globally. Lastly, the published accounting standards should be consistent with the theoretical concepts of accounting practices worldwide (Solomon and Solomon, 2005). Shaping Accounting Theory Theoretical formation is based on concept, hypothesis, and systematic structure of accounting principles and objectives. It can either be formulated by deductive or inductive theoretical approach. The deductive approach generalise the rules formation and procedures of