The current framework was approved in July 1989, and was adopted on April 2001 by the IASB. It sets out the concepts concerning the "preparation and the presentation of financial statements" for users external to the company. However, during these last two decades, the market, the business practices, as well as the economic environment, have evolved. The current framework, no longer reflecting the business reality, is therefore being updated by the IASB and the FASB.
The first phase of this new "Joint Conceptual Framework Project", regarding the objectives of financial statements and its qualitative characteristics was completed on the 28th of December. We will first determine the main strengths and weaknesses of these two sections, and then evaluate the changes that have been made.
[...] There are therefore variations in accounting practices, and in the methods that can be used to prepare financial statements, even though the current Framework aims to reduce subjectivity. The principle based approach enables flexibility and can lead to different professional judgement, because it means that its implementation is more subject to personal judgement than a rule-based approach. Lack of common understanding and comprehension The Framework's objective is also to assist in the development of IFRSs and IASs. Therefore, it assists in a worldwide harmonisation and standardization of international accounting standards and regulations. [...]
[...] The new framework compensates one of its weaknesses, by dealing with financial reporting, thus non-financial information, and not only financial statements. The objectives of financial reporting are now the same for all types of entities, no matter their size or activity. The term has been redefined. Some users are not considered as primary anymore. The new framework only considers investors, lenders, and other creditors as primary users, but the current framework included other users such as employees, suppliers, customers, or governments. [...]
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