28 May 2015

IASB: Proposed enhancements to the conceptual underpinning of financial reporting

The IASB published for public consultation proposals to improve the Conceptual Framework for Financial Reporting. The Conceptual Framework helps the IASB to develop IFRSs that bring transparency, accountability and efficiency to financial markets.

The ED proposes a number of enhancements to the Conceptual Framework, including:

• A new chapter on measurement that describes appropriate measurement bases (historical cost and current value, including fair value), and the factors to consider when selecting a measurement basis;
• Confirming that the statement of profit or loss is the primary source of information about a company’s performance, and adding guidance on when income and expenses could be reported outside the statement of profit or loss, in ‘Other Comprehensive Income’; and
• Refining the definitions of the basic building blocks of financial statements—assets, liabilities, equity, income and expenses.

Having listened to feedback from parties affected by the IASB’s work, the Board is also proposing to place more emphasis on the importance of providing information needed for investors to assess management’s stewardship, and to reintroduce an explicit reference to ‘prudence’, explaining clearly what it means.

Hans Hoogervorst, Chair of the International Accounting Standards Board, said:

“A solidConceptual Frameworkis essential because it shapes the decisions the IASB takes when developing Standards. Two particularly important areas of the proposals published today are the clarification of the key role of profit or loss as an indicator of a company’s financial performance, and the chapter that describes the information provided by historical cost and current value measurements.”

The Conceptual Framework was last revised in 2010. In 2011, respondents to the IASB’s Agenda consultation called for the IASB to restart and prioritise revision of the parts that were not revised in 2010. The IASB has listened to that feedback and plans to issue a final Conceptual Framework in 2016.

The IASB has also published for public comment a separate ED Updating References to the Conceptual Framework, which proposes that references to the Conceptual Framework are updated in existing IFRSs. 

Press release

Exposure draft

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