The Framework of Financial Accounting Concepts and Standards: Special Report

Article excerpt

This book illuminates the conceptual framework of financial reporting-why it developed and how the concepts, principles and standards interrelate. The framework represents an "underlying structure of accounting concepts" to help standard-setting bodies deal with accounting problems. While the conceptual framework has not been severely criticized, the same cannot be said of a number of standards supposedly based on this framework.

An accounting principle is "a general law or rule adopted or professed as a guide to action..." (Accounting Research Bulletin No. 7, American Institute of Accountants, 1953). Principles have been developed on two different notions:

that they should be drawn from practice, or

that they should be based on basic premises.

In recent years,the second notion has predominated.

The book traces the development of the Ameri can conceptual framework through the accounting literature from the 1930s to the 1970s, dealing with the roles of the Securities and Exchange Commission,the Committee on Accounting Proc dure, the Accounting Principles Board and the Financial Accounting Standards Board. Half the book covers the background leading up to the conceptual framework, and the other half of the book provides an analysis of this framework.

The Storeys examine the philosophy underlying the conceptual framework and how it has been used bythe FASB to enhance the quality of financial reporting. …