International Accounting Standard Board (IASB) is an important accounting based category that is in a position to make and implement the accounting standards accordingly (Curtis L. Norton, p. 12). The body is held responsible for making International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS). The purpose of IASB Conceptual framework is mentioned below in the bullet points
- Reduce the need of detailed guidance on problem
- Add immense credibility on the profession of accounting based standards
IASB sets out the elements of the financial statement, which are income statement, balance sheet, cash flow and changes in equity and each of the element has the financial information related to the company. The definitions, as well as the recognition of assets and liabilities are important while making the financial statement of the company. Recognition of Assets and Liabilities is a thing through which the financial and ethical capability of an organization could have been analyzed. High’s the amount of operational assets is an indication that the company can generate net income from their ongoing operations positively and effectively at the same time. Recognition of liabilities is yet another important disclosure for the company, as the information greatly matters for the bankers and shareholders (RATHORE, p.67).
The IASB based framework establishes a precise terminology from which the people can discusses the questions of accounting. In order to illustrate the agreement on the definition of liability based decisions on the things would have been considered on obligations, contingencies and commitments as well. IASB Framework identifies the definition of a liability in terms of present obligations arising from a past event.
All of the elements have been discussed in the Conceptual Framework (CF). A CF is referred to an analytical tool which has numerous variations and contexts. CF is used to make conceptual distinctions and organize ideas. With the help of CF, demand and supply of a certain thing could be analyzed accordingly, and then effective decisions could have been taken. It is extremely important for companies to mention about their assets and liabilities in their financial statement because most of the users of the financial statements will analyze the same (Roger Hussey, p.87). Assets are important to show in the balance sheet as it shows the financial position and worth of a company while liabilities are also important to mention as it describes the financial obligations with the company. Any financial statement without these two elements would not be accepted and could not be published.
Curtis L. Norton, Michael A. Diamond, Donald P. Pagach. Intermediate Accounting: Financial Reporting and Analysis. Chicago: Cengage Learning, 2006.
RATHORE, SHIRIN. International Accounting. London: PHI Learning Pvt. Ltd, 2007.
Roger Hussey, Audra Ong. International Financial Reporting Standards Desk Reference. Miami: John Wiley & Sons, 2005.