Financial Reporting Essay Example | Topics and Well Written Essays - 2000 words - 1

Financial Reporting - Essay Example In that sense, â€Å"financial accounting reflects, mirrors, represents, or measures this pre-existent economic reality† (Hines 1991:316). On the other hand, the Conceptual Framework is criticised â€Å"for not fulfilling its functional objectives, principally that of providing a basis for guiding standard-setting and resolving accounting controversies† (Hines, 1991:313). The purpose of the essay is to provide a critical overview of the conceptual framework and to analyze why it is criticized for not fulfilling its functional objectives as discussed above. This paper is organized as follows. The remainder of this paper is structured in the following way: Section 2 provides a general overview of the Conceptual Framework and its development; Section 3 provides a critical discussion of the concepts identified in previous section; Section 4 is concluding part of the essay. The Conceptual Framework is a tool which â€Å"sets out the concepts that underlie the preparation and presentation of financial statements† (Ifrs.com, 2014, n.p.). This tool is used by the International Accounting Standards Board (IASB) for developing and updating/revising International Financial Reporting Standards (IFRSs) (Ifrs.com, 2014, n.p.). The main objective of the Conceptual Framework is to help users in developing, revising, interpreting and understanding the IFRSs (Hoogervorst, Clark & Knubley, 2014). The Conceptual framework was initially established in the late 1970’s and early 1980’s in the USA (Pike & Chui, 2012). CF served as a foundation for accounting standards with identification of key principles and a set of qualitative characteristics (Pike & Chui, 2012). The first product produced by the CF project was the concepts statement on the objectives of financial reporting (Solomons, 1986). CF was aimed to be a set of prescriptive principles that would guide board members in standards’ setting and practitioners in problem solving processes (Hines,