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International Conceptual Framework – What Is It And Why Do You Need It?

Are you conducting a research in finance and don’t know where to start?

Start with the conceptual framework.

One of the most important components of composing a financial research paper is awareness of international policies andprocedures regarding financial reporting.

This includes the

international conceptual framework for financial reporting

.

Now, what is an international framework for financial reporting?

The International Accounting Standards Board (IASB) has set certain concepts and theories through which presentation and preparation of financial statements must be done for external users.
The role of this framework is to provide guidance on the objectives of financial statements and its quantitative characteristics. This framework also helps in the measurement, presentation and reporting of financial information.

Why is it useful?

The main objective of making this conceptual framework is so that it helps you make useful decisions about providing resources to the entity and assessing whether the board or the management has made efficient and effective decisions in using the resources.

The reporting aspect can also provide useful information to the existing and potential investors, lenders and creditors for decision making.
According to the Irene M. Wiecek, Nicola M. Young in IFRS Primer International GAAP Basics:

The purpose of the framework is to

  • Assist the IASC in the development of future international accounting standards
  • Assist national standard-setting bodies in developing national standards
  • Assist users of financial statements in interpreting the information

Who compiles and uses this information?

The framework helps a number of users. Some of them are as follows:

  • International Accounting Standards Board (IASB)

One of the most stakeholders that benefits from this framework is the International Accounting Standards Board. It helps them promote harmony in the standardization in the financial world. By maintaining consistency in the reporting procedures and policies, quality is ensured in the work and alternate accounting treatments are reduced.

  • Auditors

The framework assists auditors in making sure that the financial statements are prepared according to the International Financial Reporting Standards. It also helps them in the initial decision making based on the reports.

  • Investors and creditors

The financial statements prepared through the international conceptual framework give the investors and creditors a good preview of the position of the company. This helps them make sound decisions regarding the company easily which could have been a complicated process otherwise.
Through this framework, the company can also make many long term decisions and set their annual goals and objectives accordingly. This framework can help them develop strategies and approaches for the growth and development of the organization.

In conclusion, if you are conducting a research in the field of finance then it is important that you should be fully aware of the international conceptual framework of financial statements and their interpretations so that the analysis process conducted by you can be critical and significant.

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