Matriculation number:


Financial Reporting

Coursework Essay


What is a “conceptual framework” for financial accounting and why is it needed?

For many years the need for a “conceptual framework” has been addressed by accountants form countries all over the globe including the UK.

It was in 1973 when the FASB adopted a formal project to develop a conceptual framework in order to provide accountants with a guide to standard setting on a consistent basis. This framework was later published as the ‘Statement for Principles for Financial Reporting’ in 1999. This leads straight to the question, “What exactly is a ‘conceptual framework’”? There is no straight forward answer to that question. Since the publication of the Statement of Principles many have attempted to define the term ‘conceptual framework’ in relation to accounting, however one has yet to succeed in achieving to put together one specific definition of this concept. It may well be defined as “a constitution, a coherent system of interrelated objectives and fundamentals that can lead to consistent standards and that prescribes the nature, function and limits of financial accounting and financial statements.” (The Scope and Implications of the Conceptual Framework Project, Stanford, Conn., FASB, 1967) [pg 139, Elliot &Elliot].

Join now!

In general, a conceptual framework can help us explain why we are doing a project in a particular way. It can also help us to understand and recognise the most logic course of action in solving a problem. The conceptual framework assists in asking the right questions when standard setting and provides the order in which they should be asked. For accounting purposes, a conceptual framework contains a set of basic rules that command general support in the use of accounting standards. Also, it can be used in research to run through the possible ways of how to go ...

This is a preview of the whole essay