The International Accounting Standards Board (IASB) has issued its long-awaited revised Conceptual Framework for financial reporting, which underpins International Financial Reporting Standards (IFRS), stopping short of making major changes and focusing on topics that had not previously been covered or that showed obvious shortcomings
The Conceptual Framework sets out the fundamental concepts of financial reporting that guide the board in developing IFRS standards. It helps to ensure that the standards are conceptually consistent and that similar transactions are treated the same way, providing useful information for investors and others.
It had been largely unchanged since its inception in 1989. In 2004, IASB and the Financial Accounting Standards Board (FASB) launched a review which ended in 2010 after only minor changes were decided. IASB reactivated the project in 2012, having abandoned a substantial revision in favour of concentrating on topics such as presentation and disclosure, which had not been covered, and those that demonstrated shortcomings.
The revised Conceptual Framework includes: a new chapter on measurement; guidance on reporting financial performance; improved definitions and guidance—in particular the definition of a liability; and clarifications in key areas, such as the roles of stewardship, prudence and measurement uncertainty in financial reporting.
New elements included in the framework are a separate definition of an economic resource, referring to the potential of an asset or liability to produce or require a transfer of economic benefits, and a discussion of derecognition.
It replaces the previous version of the Conceptual Framework issued in 2010, and is effective immediately for the board and the IFRS interpretations committee.
The revised Conceptual Framework has an effective date of 1 January 2020—with earlier application permitted—for companies that use it to develop accounting policies when no IFRS standard applies to a particular transaction.
To assist companies with the transition, the board has issued a separate accompanying document ‘Amendments to References to the Conceptual Framework in IFRS Standards’. This document updates some references to previous versions of the conceptual framework in IFRS standards, their accompanying documents and IFRS practice statements.
Hans Hoogervorst, IASB chair, said: ‘The revised Conceptual Framework will greatly assist the board when developing IFRS standards. It will also help other stakeholders to better understand the concepts that underpin the standards.’
Live web presentations on the revised Conceptual Framework will be held on 18 April and will include an opportunity for participants to ask questions.
Details of the revised conceptual framework are here.
Details of the web presentations are here.
Report by Pat Sweet
