Conceptual Framework for International Financial Reporting Standards

The importance of cross-sectional comparability of financial statements in the facilitation of decision making has been addressed in accounting literature for many years. In this vein, uniformity among financial statements, which implies the presentation of financial statements being invariant among different firms worldwide with regard to several principles, which desirably include accounting procedures, measurements, concepts, classification, and methods of disclosure. It was with this idea in mind that the International Accounting Standards Committee (IASC) ¹ was created in 1973 as a body independent of government and pseudo-government control, with the stated purpose of enhancing the accounting profession worldwide and the main goal of generating a single set of international accounting standards. Contemporaneously with these developments the advent of a conceptual framework for international financial reporting became essential; and such a conceptual framework is considered to be an assembled body of interconnected basic accounting principles guiding the formulation of standards on a consistent basis as opposed to the ad hoc manner that was often used previously.