International Accounting Standards

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Presently, the FASB and the IASB are coming up with a project to build up an inclusive and reliable universal conceptual framework (Zhang & Andrew, 2013). The framework would offer a sound groundwork for the establishment of future accounting standards. Through this, the two bodies hope to come up with values, which are principle-based and uphold international coverage that offers information required for investment, credit, and other related practices (Campbell, 2009). Once completed, the framework will address a variety of accounting issues. The project will rely on the present IASB and FASB frameworks.

Need for a joint project

As illustrated above, the FASB and the IASB have their own independent frameworks. The FASB’s framework was developed in the 1970s (Campbell, 2009). The document comprises of seven concepts. Each of these concepts has been published independently. On the other hand, the IASB’s framework was developed in the year 1989 (Campbell, 2009). Comparatively, the IASB’s document is much briefer than the FASB’s document. The joint project was set up to congregate the above frameworks. Through this, it would be possible to offer a dependable rational groundwork for the union of the two sets of standards. Through the project, the two organizations aim to seal gaps to attain comprehensiveness and do away with internal disagreements to advance reliability. The major gap that should be sealed is to come up with supervision on measurement. As such, there are numerous features of the consistency of the IASB’s framework that need enhancement. The above features have resulted in complicatedness in the description of a liability and in particular the differences between a liability and equity.


The joint project between the two bodies is expected to manipulate the advancement of accounting standards in the future (Ellwood & Newbury, 2006). Owing to this, the project has attracted numerous concerns. The plan has attracted numerous criticisms than the drafters of the framework expected. Much of the issues raised come from the EU. The major topic that has been debated on a number of times focuses on measurement. The issue is yet to be resolved by the board members. In addition, the IASB’s supposed liking for fair value as an assessment goal is expected to be challenged (Viitakangas, 2006). A previous discussion article distributed by the IASB and authored by CASB had highlighted the above issue. The article commended the constructive features of fair value. Additional debates were generated by another IASB’s publication released in November 2006 (Campbell, 2009). The article tried to lay down an understanding of fair value as upheld by the FASB standards. It stated that fair value is the existing market sale price when business costs and free of entity precise suppositions are ignored.

Numerous opponents believe that the implementation of the above in IASB standards would alter existing practice unfavorably. According to them, IFRS utilizes the fair value more extensively to non-financial possessions compared to FASB (Campbell, 2009). Therefore, sale prices are perceived as less pertinent and less dependable with respect to non-financial instead of financial possessions. Even though the fair value is a focal point for a lot of the fresh disapproval of the joint project, the cause of the disapproval lies in other fundamentals of the agenda. Opponents of the project are presenting a substitute worldview of financial coverage even though this outlook is usually not well expressed.

Problems associated with how we report

With respect to the current financial reporting, it should be noted that the FASB’s and the IASB’s plans analyze the goals of the practice with respect to information, which is essential to a variety of existing and prospective clients in coming up with the financial decisions (Lamberton, 2005). As such, the preexisting framework’s clients include shareholders, creditors, workers, and government agencies. The above approach is wrong because an ideal financial report should represent the perception of an existing client. To achieve the above, the joint project aims at implementing a proprietary perception instead of a unified view, which is reliable with the accessible focus on a variety of clients.

Another problem identified in respect to the existing frameworks involves the relations linking the external financial reporting and management’s outlook. According to the frameworks, general purpose financial reporting is intended to satisfy the requirements of clients without the capability to identify the information offered to them by the management (Lamberton, 2005). Based on the above, individual management is not classified in the grouping. Even though the information offered by external financial reports is expected to be helpful to management for a variety of purposes, management has the capability to acquire whatever information it requires.

Alternatives views

An alternative views have been provided by the IASB and FASB in their joint project (Lamberton, 2005). As such, the alternative views are listed below:

  1. The information should be of existing shareholders and that stewardship necessities ought to be satisfied
  2. Precedent dealings and proceedings are pertinent information. Similarly, the information, consistency of measurement, and likelihood of existence, are significant necessities for the acknowledgment of the rudiments of accounts in order to attain dependability
  3. As indicated in the framework, prudence can improve dependability
  4. Past and present cost offer pertinent measurement foundation.
  5. The financial statements ought to indicate the economic performance of a given entity. In such situations, entity specific postulations should be factored when they replicate the real prospects presented to the entity

Based on the above views, it is apparent that the alternatives presented by the IASB and FASB in their joint project try to serve the investors. However, it should be noted that the alternatives offer precedence to present shareholders and consider stewardship as a vital and separate role of financial reporting. In addition, it inquires about accounting information, which is significant for predicting tomorrow’s cash flows. However, it supposes that the above will be attained by offering information that is vital to investor valuation model at the expense of tomorrow’s cash flows. It should be noted that such information are intended to a specific entity.

Reasons why alternatives might be rejected

There are likelihoods that some of the alternative views might be rejected (Robson, 2000). As such, the alternative view is based on findings from a number of experts with diverse perceptions. The findings focus explicit issues from a practical point of view. Therefore, there is a possibility to consider the alternatives as somewhat disjointed, practical and missing in theoretical foundations. In such situations, the alternatives can be rejected for being practical but lacking appropriate hypothesis (Zhang & Andrew, 2013).

Changes proposed and their effects

Being a continuous process, the conceptual framework has been subjected to a number of changes and will be subjected to other similar changes in the future. In the year 2012, IASB proposed that the project should center on the fundamentals of financial statements, assessment, coverage entity, presentation, and revelation (Zhang & Andrew, 2013). The aim of the changes was to enable the project to come up with a single document focusing on all the topics other than coming up with different documents focusing on different topics. Similarly, the board members agree to seek further guidance on the definition of basic accounting terms such as asset and liability. I believe that the above changes are very important because they will enable the board to come up with a single and comprehensive document of financial reporting standards once the project is completed. Similarly, by making amendments and standardizing the definitions of accounting terms the board ensured that accounting standards are principles-based, internally reliable, globally converged, and upheld international coverage that offers information required for investment (Zhang & Andrew, 2013). The amendments mention above will be very useful in America and Canada. As such, the changes will help the accountants attain business goals by enhancing decision support goals, corporate processes, and resource applications. In the absence of these changes, executives and accountants would have difficulties in confronting or appraising new hypotheses of managerial costing.


In conclusion, it should be noted that once completed that conceptual framework would offer a sound groundwork for the establishment of future accounting standards. By doing so, the framework will realize the board’s objective of coming up with values, which are principles-based, internally reliable, globally converged, and upholds international coverage that offers information required for investment, credit, and other related practices.


Campbell, J. (2009). Defining a conceptual framework for telework and an agenda for research in accounting and finance. International Journal of Business Information Systems , 4(4), 387-389.

Ellwood, S., & Newbury, S. (2006). A bridge too far: a common conceptual framework for commercial and public benefit entities. Accounting and Business Research, 36(1), 19-32.

Lamberton, G. (2005). Sustainability accounting a brief history and conceptual framework. Accounting Forum, 29(1), 7-26.

Robson, K. (2000). Social Analyses Of Accounting Institutions: Economic Value, Accounting Representation And The Conceptual Framework. Critical Perspectives on Accounting, 10(5), 615-629.

Viitakangas, L. (2006). The conceptual framework. Auckland, N.Z.: Thomson New House.

Zhang, Y., & Andrew, J. (2013). Financialisation and the Conceptual Framework. Critical Perspectives on Accounting, 15(1), 12-13.

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