Question 1(i)
Main purposes of Conceptual Framework Document
The Conceptual Framework explains the main objectives as well as the concepts that underlie financial accounting and reporting. The Conceptual Framework creates the concepts that are useful in developing International Accounting Standards and other documents that provide guidance on information included in general purpose financial statements. It standardizes the development and revision of accounting standards. However, the framework does not override the accounting standards in this case.
The main purpose of financial accounting and reporting is basically the foundation of the Conceptual Framework. The Conceptual Framework document generally explains the concepts that underlie the preparation and presentation of financial statements for external users such as the investors, creditors, government and so on in order to help them to make wise decision.
Secondly, it also support the development of future accounting standards and also minimizes the basis for alternative accounting treatments by creating the rules that should be followed in preparing financial information. Thirdly, it can also help preparers and auditors of financial information in dealing with issues that are not the subject matter of an accounting standard for any transactions, events, conditions or circumstances.
Lastly, it aids national standard setting bodies in developing national accounting standards. It also prevents the accountancy profession from setting up inconsistent accounting rules and practices as the standards are developed according to the principles set out within the framework.
Assumption which according to the Conceptual Framework underlies the preparation of financial statements.
There are a few assumptions of Conceptual Framework that underlies the preparation of financial statements.
The first assumption is