Financial Accounting Conceptual Framework (3-5 pages)

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Week 1

ACC-7035 v3: Advanced Accounting Theory and Policy (53… AP

Financial Accounting Conceptual Framework

The Financial Accounting Standards Board’s (FASB) conceptual framework is a coherent

system of interrelated objectives and fundamental concepts that prescribes the nature,

function, and limits of financial accounting and reporting for business and non-business

organizations. It represents a well-designed structure of financial accounting theory,

reference point, and foundation for all the financial accounting standards.

FASB’s conceptual framework presents definitions of the elements of financial statements

for business enterprises and for not-for-profit organizations. The conceptual framework

presents criteria for initial recognition of an item in the financial statements and

subsequent changes in or removal of a previously recognized item. These criteria include:

Definitions

Measurability

Relevance

Reliability

FASB’s Concept Statements present five measurement attributes of assets and liabilities.

The use of these attributes depends on the nature of the item and the relevance and

reliability of the attribute measured. These measurement attributes include:

Historical cost;

Current cost;

Current market value;

Net realizable (settlement) value; and

Present (or discounted) value of future cash flows.

The Conceptual Framework discusses the elements that should be included in a present

value measurement that fully capture the economic differences between sets of assets.

These elements include:

An estimate of the future cash flow;

Expectations about timing and changes in those cash flows;

The time value of money; and

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Objectives of Financial Reporting by Nonbusiness

Organization Link

The price for bearing the uncertainty inherent in the asset or liability.

This week, you will evaluate and critique FASB’s Conceptual Framework to provide valid

conclusions and opinions on the completeness of this conceptual framework, along with

any suggestions for improvement.

Signature Assignment Preview

The culminating signature assignment due towards the end of the course may require you

to complete some work ahead of the due date. The Signature Assignment requires careful

reading and a complete understanding of IFRS’ and FASB’s accounting standards for

leases. These accounting standards for leases presented different accounting treatments

of leases, lease classifications, measurements, and criteria from the lessee’s and the

lessor’s point of view. After reading and analyzing these accounting standards, you will

provide your conclusion and opinion on the effects of different lease accounting on the

financial condition and health of business enterprises. To ensure you are prepared and

have adequate time to complete this assignment, please review the instructions by

looking ahead to the Signature Assignment. Contact your professor if you have questions.

Weekly Resources and Assignments

Review the resources listed below to prepare for this week’s assignments. The resources

may include textbook reading assignments, journal articles, websites, links to tools or

software, videos, handouts, rubrics, etc.

Please note that you will visit the websites of the Financial Accounting Standards Board

(FASB) and the International Accounting Standards Board (IASB) (you need to register at

the IFRS website and get free access to the IFRS). You will need to access these resources

throughout the course.

0 % 0 of 7 topics complete

Financial Accounting Standards Board. (1980). Statement of financial accounting

concepts (Concepts. No. 4). Objectives of financial reporting by nonbusiness

organizations.

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Recognition and Measurement in Financial Statements

of Business Enterprises Link

Elements of Financial Statements Link

Using cash flow information and present value in

accounting measurements Link

Objectives and Qualitative Characteristics of Financial

Information Link

Notes to Financial Statements Link

Financial Accounting Standards Board. (1984). Statement of financial accounting concepts

(Concepts No. 5). Recognition and measurement in financial statements of business

enterprises.

Financial Accounting Standards Board. (1985). Statement of financial accounting concepts

(Concepts No. 6). Elements of financial statements.

Financial Accounting Standards Board. (2000). Statement of financial accounting concepts

(Concepts No. 7). Using cash flow information and present value in accounting

measurements.

Financial Accounting Standards Board. (2010). Statement of financial accounting concepts

(Concepts No. 8). Conceptual framework for financial reporting: Chapter 1, the objective

of general-purpose financial reporting, and Chapter 3, qualitative characteristics of useful

financial information (a replacement of FASB concepts statements No. 1 and No.2).

Financial Accounting Standards Board. (2018). Statement of financial accounting concepts

(Concepts No. 8). Conceptual framework for financial reporting: Chapter 8, notes to

financial statements.

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Week 1 - Assignment: Critique FASB's Concept

Statements Assignment

Due April 4 at 11:59 PM

Visit FASB’s website, locate and read FASB’s Concept Statements, and prepare an analysis

and evaluation of the financial accounting conceptual framework and provide your

opinion and suggestions for any improvement.

Be sure your paper addresses the following:

Brief description of the joint project of FASB and the International Accounting

Standards Board (IASB) to improve and converge their conceptual framework.

Discussion of the objectives of financial reporting and qualitative characteristics of

financial information.

Analysis of the financial accounting measurement attributes. Provide an example

for each one.

Discussion and criticism of FASB’s recognition criteria.

Discussion and criticism of FASB’s framework on using cash flow and present value

in accounting measurements.

Analysis of types of and limitations on the information in notes to the financial

statements.

Conclusion on the completeness of the financial accounting conceptual framework

along with your suggestion for improvement.

Length: 3 to 5 pages

References: Include a minimum of 3 scholarly resources.

The completed assignment should address all the assignment requirements, exhibit

evidence of concept knowledge, and demonstrate thoughtful consideration of the content

presented in the course. The writing should integrate scholarly resources, reflect

academic expectations and current APA standards, and adhere to Northcentral

University's Academic Integrity Policy.

When applicable, conduct a Turnitin pre-check and then upload your completed

assignment and click the Submit to Dropbox button.