Status and purpose of the Conceptual Framework (Conceptual_Framework_05-19_ACOMPapr26_07-29)

The Conceptual Framework describes the objective of, and the concepts for, general purpose financial reporting. The purpose of the Conceptual Framework is to:

(a)            assist the Australian Accounting Standards Board (Board) to develop Australian Accounting Standards (Standards) that are based on consistent concepts;

(b)            assist preparers to develop consistent accounting policies when no Standard applies to a particular transaction or other event, or when a Standard allows a choice of accounting policy; and

(c)            assist all parties to understand and interpret the Standards.

The Conceptual Framework is not a Standard. Nothing in the Conceptual Framework overrides any Standard or any requirement in a Standard. This is consistent with the Australian Securities and Investments Commission Act 2001, section 227(1).

To meet the objective of general purpose financial reporting, the Board may sometimes specify requirements that depart from aspects of the Conceptual Framework. If the Board does so, it will explain the departure in the Basis for Conclusions on that Standard.

The Conceptual Framework may be revised from time to time on the basis of the Board’s experience of working with it. Revisions of the Conceptual Framework will not automatically lead to changes to the Standards. Any decision to amend a Standard would require the Board to go through its due process for adding a project to its agenda and developing an amendment to that Standard.

The Conceptual Framework contributes to the stated mission of the Board, including developing Standards that bring transparency, accountability and efficiency to financial markets in Australia. The Board’s work serves the public interest by fostering trust, growth and long-term financial stability in the Australian economy. The Conceptual Framework provides the foundation for Standards that:

(a)            contribute to transparency by enhancing the international comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.

(b)            strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. Standards based on the Conceptual Framework provide information needed to hold management to account. As a source of globally comparable information, those Standards are also of vital importance to regulators around the world.

(c)           contribute to economic efficiency by helping investors to identify opportunities and risks across the world, thus improving capital allocation. For businesses, the use of a single, trusted accounting language derived from Standards based on the Conceptual Framework lowers the cost of capital and reduces international reporting costs.

In respect of not-for-profit entities, the Conceptual Framework also contributes to the stated mission of the Board, including developing Standards that bring transparency and accountability of those entities to their resource providers and beneficiaries, and efficiency to the allocation of scarce resources to not-for-profit entities in Australia. The Conceptual Framework also, in respect of not-for-profit entities, provides the foundation for Standards that: 

(a) strengthen accountability by reducing the information gap between the providers of resources and the people to whom they have entrusted those resources. Standards based on the Conceptual Framework contribute to providing information needed to hold management to account. 

(b) contribute to better deployment of scarce resources by helping resource providers and beneficiaries to compare the efficiency and effectiveness of service delivery by different entities, and the capacity of entities to provide services in the future, thus assisting the allocation of resources and the identification of future resource needs.