Will the changes proposed to the conceptual framework's definitions and recognition criteria provide a better basis for IASB standard setting?

Abstract

In this paper we evaluate the International Accounting Standards Board's (IASB) efforts, in a discussion paper (DP) of 2013, to develop a new conceptual framework (CF) in the light of its stated ambition to establish a robust and consistent basis for future standard setting, thereby guiding standard setting decisions in complex and controversial areas. We investigate the impact of the definitions and recognition criteria for assets and liabilities in the existing CF and the DP. We conclude that, in areas where standards have diverged from the CF in the past, that is, not consistently applying probability thresholds, the DP supports the existing standards by removing those thresholds. Furthermore, the DP includes the more judgemental criteria of relevance and faithful representation to determine whether an item should be recognised as an asset or liability. This would justify those existing standards which currently do not recognise items that meet the (current and revised) definitions of asset or liability. Altogether, we conclude that the development of IFRSs will continue to be the outcome of professional debate, negotiation, consensus seeking and political influence. We therefore recommend that additional measures should be taken by the IASB to ensure coherence in the development and application of standards after implementation of a new CF.

Moving the Conceptual Framework Forward: Accounting for Uncertainty

“…14 While inventory, fixed assets, and some development and software costs appear on the balance sheet in satisfaction of the asset definition, many of the other investments satisfy the requirement of expected economic benefits yet are expensed immediately. Consistent with the argument in Brouwer et al (2015), it is largely left to individual standards to draw the line, without the benefit of explicit guidance from the Framework. In IAS 38, for example, the IASB applied the criterion of "probable future economic benefits" to distinguish between "research" (which is expensed) and "development" (which is capitalized and amortized).…”

New development: The conceptual underpinnings of international public sector accounting

“…Currently, IPSAS are based on IFRS. Many standards were issued under both IAS/IFRS and IPSAS before respective frameworks were in place and there are inconsistencies between standards and the frameworks (Brouwer et al, 2015). The IPSASB does now recognize different purposes and users of general purpose financial reports from those of the IASB, but it is not clear how these translate into different standards, particularly for similar transactions though (in line with the subsequently stated objectives and user needs) theoretically they should.…”

“…In the UK, Page and Spira (1999) argue that conceptual frameworks are the 'conceptual underwear' of accounting and use the metaphor to explain its dual purpose -to support or to make standard setting look good? More recently, in the context of the IFRS framework, Brouwer et al (2015) argue there are many inconsistencies between the framework and the standards relating to assets and liabilities, for example, standards for leasing and deferred tax. These comments illustrate Gaas' (1988) point that a conceptual framework's abstract foundations can be used to support multiple solutions to any policy issue, while at the same time those foundations are unlikely to provide a sufficient and compelling basis for any particular decision (Gaa, 1988).…”

The Return of Stewardship, Reliability and Prudence – A Commentary on the IASB’s New Conceptual Framework

“…Barker & Teixeira, 2018;Barker, Lennard, Nobes, Trombetta, & Walton, 2014; Van Mourik, 2014; or the use of the CF in standard-setting (e.g. Brouwer, Hoogendorn, & Naarding, 2015;Walton, 2018) and practice (e.g. Nobes & Stadler, 2015), none of them focuses on the reintroduction of stewardship, reliability and prudence in the CF2018 (or in the IASB's 2015 Exposure Draft (ED)).…”