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Report of the Review Committee under the Chairmanship of Sir Ron Dearing CB, published in September 1988 - By tradition, company law has provided a general framework of rules.

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"A lack of a conceptual framework is a handicap to those involved in setting standards as well as to those applying them. ... We believe that work in this area will assist standard-setters in formulating their thinking on particular accounting issues, facilitate judgments on the sufficiency of the disclosures required to give a true and fair view, and assist preparers and auditors in interpreting accounting standards and in resolving accounting issues not dealt with by specific standards." Report of the Review Committee under the Chairmanship of Sir Ron Dearing CB, published in September 1988 By tradition, company law has provided a general framework of rules. In the mid-nineteenth century an Act of Parliament made possible the separation of management from ownership. According to this separation came the need for directors to provide the company's published accounts to shareholders in order to show the performance and financial position of the company. In those published accounts it was required to determine what should be included in those accounts and how they should be prepared. At that particular moment in time law did not give emphasis, and allowed the specification and the contents of those accounts to be determined by contract between the shareholders and directors or even allowed the flexibility for directors in deciding what information was relevant in any particular circumstances. ...read more.


Concussive examples who have led the most criticism were those of GEC/AEI and Pergamon/Leasco affairs who anticipated profit in their final accounts but actually this situation was due to judgment regarding accounting principles and bases. According to the need of standardization and the problem of superfluous flexibility in the choice of accounting policies, ICAEW issued the "Statement of Intent on Accounting Standards in the 1970's" where they set out their strategy for the development of standards. As a result, the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland and the Institute of Chartered Accountants in Ireland set up the Accounting Standard Steering Committee. In 1971 the Chartered Association of Certified Accountants and the Chartered Institute of Management Accountants joined the committee as well as the Chartered Institute of Public Finance and Accountancy in 1976. From the 1st of February 1976 the Committee became the Accounting Standard Committee (ASC) and was reconstituted as a joint committee of the six accountancy bodies performing now through the Consultative Committee of Accountancy Bodies (CCAB). The objectives of the ASC were the continuation of the 'Statement of Intent on Accounting Standards in 1970's created by the ICAEW. ...read more.


As Dopuch and Sunder (1980) and Gaa (1988) have pointed out 'the concept of an objective is unclear when applied to an activity (i.e. financial reporting) rather than to individuals. People have goals and objectives motivating them to perform their activities; but the activities themselves do not have goals or objectives'. A similar comment could be made concerning the attribution of objectives financial statements. However the purpose of an activity or an artefact reflects the objectives of its designer in designing it for a specific purpose. In that sense a set of financial statements and notes (a 'financial reporting package') could have a purpose; this will reflect the objective of the package's designers. But this raises the question of how conceptual framework could serve in guiding the design of such a 'package' and its components. From my point of view it is questionable whether the ASB's conceptual framework be will successful in meeting its objectives. It may take more time and effort but if the ASB wish to use a conceptual framework as a basis for developing accounting standards, then it is essential that the conceptual framework is itself soundly based . At the present, these accounting bodies are in danger of building a house of accounting standards on shaky foundation 1 ...read more.

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