1. What is conceptual framework?

Conceptual framework can be seen as an attempt to determine the nature and purpose of accounting. Conceptual framework should take into account issues surrounding the theory and concepts of financial reporting and form a coherent and consistent basis that will underpin the development of accounting standards. Conceptual framework can be applied to various fields, but when it specifically related to financial reporting conceptual framework can be seen as statements of generally accepted accounting principles (GAAP), which form a frame of reference for the evaluation of existing practices and new developments. The purpose of financial reporting is to provide useful information as a basis for making economic decisions, a conceptual framework will be the basis of a theory to determine how transactions are measured (historical or current value) and reported that how they produce or deliver to the consumer. Some accountants have questioned whether the conceptual framework is necessary to produce reliable financial statements. The history of the past indicates the absence of the conceptual framework, accounting standards often resulted in a lack of:

Some standard-setting bodies have been biased in their composition, and this affects the quality and the standards

The issues are the same theory many times were studied by standard for example, whether the transaction poses assets (research and development) or liability (environmental provisions)?

2. Why is there a need for conceptual framework?

Good framework will enable the FASB to issue standards that are more useful and consistent over time. The framework will also improve the understanding and confidence to users of financial reports for the financial reporting and will increase the contribution of the financial report.

To be useful, make regulations relating to the construction and concept. A conceptual framework was developed to allow the IASB issued an announcement more useful and consistent over time and standard cubic should occur.

As a result of a soundly developed conceptual framework, the profession will be able to more quickly solve new and emerging practical with reference to the existing framework of basic theory. For example, Sunshine Mining (U.S.) sold two bond issues. It can either redeem them with $ 1,000 in cash or with 50 ounces of silver, whichever is worth more at maturity. Both bonds have a stated interest rate of 8.5 percent.

To formulate concepts based on the compilation of financial reports. It also provides guidance in resolving disputes that arise during the process of setting standards limiting the questions that happened, for example, do certain specific standards in accordance with the conceptual framework?