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Hi, need a little help with this question
Which of the following is not a disadvantage of having a conceptual framework of accounting?
Answers:
A.
It does not allow for different conceptual bases depending on the userB.
It does not make the setting of accounting standards easierC.
It may hamper the development of preparing accounting standardsD.
It may lead to inconsistent accounting practicesmy answer was A, but the answer given was D.
why is it so?
Isnt the Frameword a principle based system (unlike the GAAP that is a rule based system) and therefore allowing the exercise of judgement when dealing with transactions? and since judgement is exercised, there will be some inconsistencies?
where did I go wrong?
thank you in advance!
Hi,
I don’t think that it is a great question in all honesty.
It cannot be A as it does allow for for different conceptual bases to be used and so is a disadvantage. As for the other answers then I think they are a bit confusing.
B – It does make the setting of accounting standards easier
C – It doe not hamper the setting of accounting standards
D – It can lead to inconsistencies in accounting practices where one company adopts one method and another the other (revaluation of PPE), which as you say is a disadvantage.
So, I’m a bit confused myself as to which is the answer. Where did the question itself come from?
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I need help with clarification or a different understanding . While reading the bpp acca module I found a statement that says the principles based conceptual framework helps to judge whether a departure from from a standard is or not inline with the principles set out in the framework.
1. Why does the standards refer back to the framework given that the standards overrides the framework when there is a contradiction between the two.
2. Plus there is no-where in the framework where guidance is given on departure from the standards.
Please help.
Hi,
1. The standard does not override the Framework, the standard is prepared based upon the principles contained within the Framework. If there is a complex transaction that is not picked up in full by the standard then we’d then go back to the underlying principles and concepts within the Framework.
2. As it is principles based, the key is that we need to apply the principles so in effect is leaving an element of judgement in deciding how to treat the item.
Hope that helps.
Thanks
Hi tutor,
Revision of framework doesnot effect the IAS/IFRS by any means at yet.
e.g
Revised recognition criteria for an asset and liability doesnot include ‘probability’ but IAS 38 recognises IA on probability basis.Similar is the case in IAS 37.
i.e Only framework has been revised up till now(sept 2020) and there is no revision of IASs/IFRSs regarding definition,recognition of assets and liabilities and their measurement basis.This is what I understand.Am I good in this understanding?
If it so, this may be asked that how revised framework contradict with the standards?
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