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international working Committees
THE IASB CONCEPTUAL FRAMEWORK FOR
FINANCIAL REpORTING
By MARCO ALLEGRINI, Chairman IAFEI IFRS Committee
Introduction
The IASB has been working on the revision of the
Conceptual Framework since 2012. It is not a standard,
but it can be useful for preparers (and especially CFOs)
in order to understand the concept and the underlying
logics that the standard setter (IASB) is applying.
The Conceptual Framework is a practical tool that
aims at supporting the IASB to develop standards on
consistent concepts, preparers to develop consistent
accounting policies when no Standard applies to a
particular transaction or event, or when a Standard
allows a choice of accounting policy; and assists others
to understand and interpret the Standards.
Project stages
The IASB’s existing Conceptual Framework was
developed in 1989. The material on the objective of
financial reporting and on the qualitative characteristics
of financial information was revised by the Board in
2010.
IASB is revising its Conceptual Framework, since it
believes that some important areas are not covered; the
guidance in some areas is unclear and some aspects of
the existing Conceptual Framework are out of date.
On May 2015 the IASB published an Exposure Draft
(hereafter, called “ED”) that sets out the proposals for
a revised Conceptual Framework (hereafter, also called
“CF”). The deadline for comments on this ED CF ended
on 25 November 2015.
Since May 2016, the IASB Board aims to finalise the
revised Conceptual Framework in early 2017.
Structure
The ED CF deals with these subjects:
• Objective of financial reporting and qualitative
characteristics of useful financial information
• Financial statements and the reporting entity
• Elements of Financial statements
• Recognition and Derecognition
• Measurement
• Presentation and Disclosure
• Concept of capital and capital maintenance
In this article, some of the high number of issues dealt in
the ED CF will be presented and discussed.
Objective of financial reporting and qualitative
characteristics of useful financial information
Stewardship
The current version of the Conceptual Framework
describes the objective of general purpose financial
reporting as: “
... to provide financial information
about the reporting entity that is useful to existing and
potential investors, lenders and other creditors inmaking
decisions about providing resources to the entity. Those
decisions involve buying, selling or holding equity and
debt instruments, and providing or settling loans and
other forms of credit
”.
The ED CF proposed to reintroduce the term
‘stewardship’ and give more prominence, within the
objective of financial reporting, to the importance of
providing information needed to assess management’s
stewardship of the entity’s resources. To achieve this,
the Exposure Draft proposed to identify the information
needed to assess the stewardship of management as
separate from the information needed to help users
assess the prospects for future net cash inflows to the
entity.
We agree with the ED CF that existing and potential
investors, lenders and other creditors need information
to help them assess both the prospects for future net
cash inflows to an entity and management’s stewardship
of the entity’s resources, but the ED does not include
much guidance on the implications for standard setting
of the objective of providing information useful for
assessing the management’s stewardship. Actually,
many comments received on the ED pointed out that
the objective or providing users information to help
assess an entity’s prospects for future net cash inflows.
Conceptually, these two objectives may be aligned, but
they still have their own meaning for users. We could
think that stewardship might be better assessed through
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