Slide AKT 405 Teori Akuntansi 4 Godfrey
GODFREY
HODGSON
HOLMES
TARCA
CHAPTER 4
A CONCEPTUAL
FRAMEWORK
The role of a conceptual
framework
• A structured theory of accounting
• States the scope and objective of
financial reporting
• Identifies and defines qualitative
characteristics of financial information
and the basic elements of accounting
• Deals with principles and rules of
recognition and measurement, and
report disclosures
2
The role of a conceptual
framework
… a coherent system of interrelated
objectives and fundamentals that is
expected to lead to consistent
standards and that prescribes the
nature, function and limits of
financial accounting and reporting.
FASB
3
The role of a conceptual
framework
Issues:
– Do we need a general theory of
accounting?
– Is current accounting too permissive?
– Are current accounting practices too
inconsistent?
– Is there too much political interference
in the neutrality of accounting reports?
4
The role of a conceptual
framework
Benefits:
– consistent, logical reporting
requirements
– greater compliance
– enhanced accountability
– fewer specific standards
– enhanced understanding of reporting
requirements
– more economical standard setting
5
Objectives of conceptual
frameworks
Financial reporting should provide
information that is useful to present
and potential investors and creditors
and other users in making rational
investment,
credit
and
similar
decisions.
FASB
6
Objectives of conceptual
frameworks
• Information should be
– useful in making economic decisions
– useful in assessing cash flow prospects
– about enterprise resources, claims to
those resources and changes in them
7
Objectives of conceptual
frameworks
8
Developing a conceptual
framework
• The development of conceptual
frameworks is influenced by two key
issues:
– principles versus rules-based
approaches to standard setting
– information for decision making and the
decision-theory approach
9
Principles-based and
rule-based standard
setting
• IASB mostly produces consistent,
coherent principles-based standards
• Rule-based standards may increase
comparability and verifiability and
may reduce earnings management
10
Principles-based and
rule-based standard
setting
• The standards of the FASB have
traditionally been rule-based
• Emphasis now being given to
principles
• Timely given the IASB/FASB
convergence program
11
Information for decision
making
and the decisiontheory approach
• Accounting data are required for
decision making or accountability
purposes
– stewardship
– decision making
• users
12
Information for decision
making
and the decisiontheory approach
• The decision-theory approach maps
the process by which the outputs of
the accounting system provide inputs
to the decision model of a user
13
Information for decision
making
and the decisiontheory approach
Decision-theory process
Overall
Overalltheory
theory
of
ofaccounting
accounting
Individual
Individual
accounting
accounting
system
system
Prediction
Prediction
model
modelof
of
user
user
Decision
Decision
model
modelof
of
user
user
14
International developments:
the IASB
and FASB Conceptual
Framework
• In 2004 the FASB and IASB agree to
undertake a joint project to:
– develop an improved, common conceptual
framework
– goal of developing standards that are
principles-based, internally consistent and
internationally converged
– an Exposure Draft was produced - June 2009
– deferred consideration of not-for-profit
sector issues
15
International developments: the
IASB
and FASB Conceptual
Framework
• ED has several contentious areas:
– entity vs proprietorship perspective
– primary user group
– decision usefulness and stewardship
– qualitative characteristics
16
International developments:
the IASB
and FASB Conceptual
Framework
• Australia follows an approach whereby
issues for both the not-for-profit and forprofit sectors are considered together
• Standards are intended to apply to both
sectors
• IFAC’s International Public Sector
Accounting Standards Board has begun
a project to develop a public sector CF
17
A critique of conceptual
framework projects
• Approaches to developing a CF:
– scientific
• recourse to logic and empiricism or both
– professional
• prescribes the best course of action by
recourse to professional values
18
A critique of conceptual
framework projects
Scientific criticisms:
• prescriptive
• unspecified rules and conventions
• do not resolve contemporary disclosure
issues
• vague definitions
• do not address measurement issues
• risk of mechanical decision making
• framework may become an end in itself
• overreliance on definitions
19
Ontological and
epistemological
assumptions
• Freedom from bias (neutrality)
– an information quality that avoids leading
users to conclusions that secure the particular
needs, desires or preconceptions of the
preparers
• Solomons: freedom from bias as ‘financial
mapmaking’
• Feyerabend: scientific truth is not absolute
• Hines claims mainstream accounting is
‘taken-for-granted’
20
Circularity of reasoning
• Objective of a conceptual framework: guide
the everyday practice of accountants
• A superficial view
– deducing principles from generalised
theory
• Existing frameworks typified by internal
circularity:
– e.g. FASB Statement No. 2
– qualitative characteristics are often stated in
terms of other qualities which are nonoperationalised
21
An unscientific discipline
• Is accounting a science?
– prescriptive by nature and value laden
• Stamp
Until we are sure in our minds about the
nature of accounting, it is fruitless for
the profession to invest large resources
in developing a conceptual framework to
support accounting standards.
22
Positive research
• Conceptual framework projects ignore the
empirical findings of positive accounting
research
– in conflict with each other
• Mounting evidence that capital markets
are not efficient
• If the conceptual framework could ensure
users receive useful information this would
serve a useful purpose
23
The conceptual
framework as a policy
document
– As a generalised body of knowledge,
conceptual frameworks fail a number of
‘scientific’ tests
– The distinction between theories and
policies is important
– CFs not produced in a political vacuum
– CFs may just be a reflection of the
dominant group’s will
24
Professional values and
self-preservation
• ‘Self-preservation’
– implies the pursuit of self-interest
• ‘Professional values’
– suggests idealism and altruism
• Gerboth
– sense of personal responsibility
• Hines
– professional legitimacy
25
Conceptual framework
for
auditing standards
• Auditing is a discipline based in logic
• The traditional verification role has
evolved into business risk auditing
26
Summary
• The conceptual framework is intended to provide a
coherent and prescriptive guide to accounting practice
• If effective it should result in the communication of
more useful financial information to users
• Developing a conceptual framework has been a long
and complicated process
• Criticisms of conceptual framework projects exist
• Others debate the importance of these criticisms
• In auditing there has been a shift away from
substantive testing toward the role of client business
risk
27
Key terms and concepts
• Conceptual frameworks for accounting
and auditing
• Statement of accounting concepts
• FASB and IASB
• Principles-based and rule-based standards
• Decision making and decision-theory
• Professional values and self-preservation
• Business risk auditing
28
29
HODGSON
HOLMES
TARCA
CHAPTER 4
A CONCEPTUAL
FRAMEWORK
The role of a conceptual
framework
• A structured theory of accounting
• States the scope and objective of
financial reporting
• Identifies and defines qualitative
characteristics of financial information
and the basic elements of accounting
• Deals with principles and rules of
recognition and measurement, and
report disclosures
2
The role of a conceptual
framework
… a coherent system of interrelated
objectives and fundamentals that is
expected to lead to consistent
standards and that prescribes the
nature, function and limits of
financial accounting and reporting.
FASB
3
The role of a conceptual
framework
Issues:
– Do we need a general theory of
accounting?
– Is current accounting too permissive?
– Are current accounting practices too
inconsistent?
– Is there too much political interference
in the neutrality of accounting reports?
4
The role of a conceptual
framework
Benefits:
– consistent, logical reporting
requirements
– greater compliance
– enhanced accountability
– fewer specific standards
– enhanced understanding of reporting
requirements
– more economical standard setting
5
Objectives of conceptual
frameworks
Financial reporting should provide
information that is useful to present
and potential investors and creditors
and other users in making rational
investment,
credit
and
similar
decisions.
FASB
6
Objectives of conceptual
frameworks
• Information should be
– useful in making economic decisions
– useful in assessing cash flow prospects
– about enterprise resources, claims to
those resources and changes in them
7
Objectives of conceptual
frameworks
8
Developing a conceptual
framework
• The development of conceptual
frameworks is influenced by two key
issues:
– principles versus rules-based
approaches to standard setting
– information for decision making and the
decision-theory approach
9
Principles-based and
rule-based standard
setting
• IASB mostly produces consistent,
coherent principles-based standards
• Rule-based standards may increase
comparability and verifiability and
may reduce earnings management
10
Principles-based and
rule-based standard
setting
• The standards of the FASB have
traditionally been rule-based
• Emphasis now being given to
principles
• Timely given the IASB/FASB
convergence program
11
Information for decision
making
and the decisiontheory approach
• Accounting data are required for
decision making or accountability
purposes
– stewardship
– decision making
• users
12
Information for decision
making
and the decisiontheory approach
• The decision-theory approach maps
the process by which the outputs of
the accounting system provide inputs
to the decision model of a user
13
Information for decision
making
and the decisiontheory approach
Decision-theory process
Overall
Overalltheory
theory
of
ofaccounting
accounting
Individual
Individual
accounting
accounting
system
system
Prediction
Prediction
model
modelof
of
user
user
Decision
Decision
model
modelof
of
user
user
14
International developments:
the IASB
and FASB Conceptual
Framework
• In 2004 the FASB and IASB agree to
undertake a joint project to:
– develop an improved, common conceptual
framework
– goal of developing standards that are
principles-based, internally consistent and
internationally converged
– an Exposure Draft was produced - June 2009
– deferred consideration of not-for-profit
sector issues
15
International developments: the
IASB
and FASB Conceptual
Framework
• ED has several contentious areas:
– entity vs proprietorship perspective
– primary user group
– decision usefulness and stewardship
– qualitative characteristics
16
International developments:
the IASB
and FASB Conceptual
Framework
• Australia follows an approach whereby
issues for both the not-for-profit and forprofit sectors are considered together
• Standards are intended to apply to both
sectors
• IFAC’s International Public Sector
Accounting Standards Board has begun
a project to develop a public sector CF
17
A critique of conceptual
framework projects
• Approaches to developing a CF:
– scientific
• recourse to logic and empiricism or both
– professional
• prescribes the best course of action by
recourse to professional values
18
A critique of conceptual
framework projects
Scientific criticisms:
• prescriptive
• unspecified rules and conventions
• do not resolve contemporary disclosure
issues
• vague definitions
• do not address measurement issues
• risk of mechanical decision making
• framework may become an end in itself
• overreliance on definitions
19
Ontological and
epistemological
assumptions
• Freedom from bias (neutrality)
– an information quality that avoids leading
users to conclusions that secure the particular
needs, desires or preconceptions of the
preparers
• Solomons: freedom from bias as ‘financial
mapmaking’
• Feyerabend: scientific truth is not absolute
• Hines claims mainstream accounting is
‘taken-for-granted’
20
Circularity of reasoning
• Objective of a conceptual framework: guide
the everyday practice of accountants
• A superficial view
– deducing principles from generalised
theory
• Existing frameworks typified by internal
circularity:
– e.g. FASB Statement No. 2
– qualitative characteristics are often stated in
terms of other qualities which are nonoperationalised
21
An unscientific discipline
• Is accounting a science?
– prescriptive by nature and value laden
• Stamp
Until we are sure in our minds about the
nature of accounting, it is fruitless for
the profession to invest large resources
in developing a conceptual framework to
support accounting standards.
22
Positive research
• Conceptual framework projects ignore the
empirical findings of positive accounting
research
– in conflict with each other
• Mounting evidence that capital markets
are not efficient
• If the conceptual framework could ensure
users receive useful information this would
serve a useful purpose
23
The conceptual
framework as a policy
document
– As a generalised body of knowledge,
conceptual frameworks fail a number of
‘scientific’ tests
– The distinction between theories and
policies is important
– CFs not produced in a political vacuum
– CFs may just be a reflection of the
dominant group’s will
24
Professional values and
self-preservation
• ‘Self-preservation’
– implies the pursuit of self-interest
• ‘Professional values’
– suggests idealism and altruism
• Gerboth
– sense of personal responsibility
• Hines
– professional legitimacy
25
Conceptual framework
for
auditing standards
• Auditing is a discipline based in logic
• The traditional verification role has
evolved into business risk auditing
26
Summary
• The conceptual framework is intended to provide a
coherent and prescriptive guide to accounting practice
• If effective it should result in the communication of
more useful financial information to users
• Developing a conceptual framework has been a long
and complicated process
• Criticisms of conceptual framework projects exist
• Others debate the importance of these criticisms
• In auditing there has been a shift away from
substantive testing toward the role of client business
risk
27
Key terms and concepts
• Conceptual frameworks for accounting
and auditing
• Statement of accounting concepts
• FASB and IASB
• Principles-based and rule-based standards
• Decision making and decision-theory
• Professional values and self-preservation
• Business risk auditing
28
29