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Analysis On Conceptual Framework

  0 Downloads   |   3 Pages 611 Words   |   Published Date: 08/12/2017

Question:

Discuss about the Analysis on Conceptual Framework.

 

Answer:

Introduction:

The article advocated that the failure pertaining to Conceptual Framework (CF) prepared and implemented by the FASB could be attributed towards incongruence between the reality and the standards relating to management accounting. Moreover, the article delves towards evaluating the pertinence of Conceptual Framework, prepared by the FASB, based on several parameters comprising of alignment to reality, validity, usability and rational aspects. The inherent drawbacks of CF because of being descriptive instead of prescriptive nature have facilitated ambiguity in accounting practice. Further, in the context of resolving issues pertinent to accounting CF fails similarly like its predecessor. Zadek, Evans and Pruzan (2013) states the calculations and measurements encompassed by accounting tends to aggravate objectivity thereby reducing degree of biasness along with non-alignment with economic reality. The role of CF towards reducing degree of non-alignment between real world and that of accounting followed by creation of legitimacy on accounting profession are significant. The paper presents the view that the perceptions about social issues facilitate values instead of materials facts.

Dopuch and Sunder (1980) stated, “CF failed towards resolving issues that previous standard setting body failed to be successful in”. The author focuses upon the shortcomings concerning the Conceptual Framework in terms of guiding accounting policies and resolving issues pertaining to conflicts in selection of accounting techniques. However, Friedman, Hughes and Saouma (2016) states in this context that multiplicity of accounting policies and measurement techniques facilitates improvised financial accounting. It occurs because each procedure has been developed taking into account certain issues that other prevailing techniques failed to resolve. Thereby, the remarks about the functionality of accounting procedures were premature and were stated with inadequate degree of evaluation. Moreover, from the aggregate list of policies provided in the content, the issues regarding resolving of conflicts crop up in selected segments; thereby the notion of inefficiency attached with the CF can be construed as lacking rationality.

Brown (1987) stated rationality as an achievement elevating it above the function of being a guideline for social life. However, on the contrary proportion of rationality is inherent in nature while the residue is inculcated through analytical mindset coupled with keen observation. Such elevation of rationality leaves little space for improvement; moreover, degree of rationality varies amongst people bringing in heterogeneity in quantum of rational mindset. Thereby, restricting the open-endedness of rationality through elevating it to a level beyond criticism and review can be construed as deficient in terms of logical assertion.

The article takes into account the drawbacks pertaining to Conceptual Framework laid down by the FASB. Moreover, on a broader context, it discusses the interactions regarding objective nature of accounting measurement; the evaluation of prescriptive role that is required to be followed by the CF. The article also follows the degree of alignment of accounting guidelines with that of societal rules and reality. The topics taken up in the aforementioned amount presents large degree of intertwined studies thereby overview pertaining to the article is of relevance to the future interdisciplinary studies pertaining to the accounting.

 

References:

Brown, R.H., 1987. Reason as rhetorical: on relations among epistemology, discourse and practice. The rhetoric of the human sciences: Language and argument in scholarship and public affairs, pp.184-197.

Dopuch, N. and Sunder, S., 1980. FASB's statements on objectives and elements of financial accounting: A review. Accounting Review, pp.1-21.

Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.

Friedman, H.L., Hughes, J.S. and Saouma, R., 2016. Implications of biased reporting: conservative and liberal accounting policies in oligopolies. Review of Accounting Studies, 21(1), pp.251-279.

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