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Question: Write an essay comparing and contrasting the Conceptual Frameworks of the IASB and the FASB.
Brief Introduction about IASB, FASB and Conceptual Framework:
International Accounting Standard (IASB) is an international GAAP setter body which develop, promote and implement International Financial Reporting Standards (IFRS). Financial Accounting Standard Board (FASB) is an US based accounting standard body which develop and implement GAPP. The conceptual framework is a series of financial accounting concepts which guide the accounting standard setters to develop generally accepted accounting principles.
Detailed analysis of conceptual framework issued by IASB and FASB:
Both IASB and FASB have developed conceptual framework and the detailed analysis of conceptual framework issued by both the board are as below:
The IASB has issued revised conceptual framework in March 2018 for financial reporting. The conceptual framework issued by IASB has explained the purpose of financial reporting, qualitative features of financial statements, definition of reporting entity, criteria for recognition and measurement of liabilities and assets, derecognition criteria, disclosure and presentation guidance and concepts, basis for measurement of assets and liabilities etc.
The FASB has also issued the conceptual framework which describes the purpose of financial statements, elements and statements of financial accounting concepts, recognition and measurement and the benefits of framework etc.
There are various similarities and differences between FASB and IASB conceptual framework which are as below:
Both the standards have defined the financial statements elements i.e. liabilities, assets and equity, revenue, gains, expenses and losses. Both the conceptual frameworks have defined recognition criteria for assets and liabilities.
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Under FASB conceptual framework, an item should be identified in the financial statements only when the four fundamental recognition criteria are met and the conditions of materiality threshold. and cost-benefit restrictions. The main four recognition criteria are such as the item should satisfy the definition of elements of financial statements, item should be measurable, reliability and relevance. Further the additional criteria for recognition of revenue i.e. revenue should be realized, and it should be earned i.e. all the conditions of seller obligations have been satisfied. Under IASB, the items are recognized when the item meet the definition of financial elements and qualitative features of relevant information is met i.e. faithful representation and relevance. Further the entity should derecognize the item as asset or liability when loses control on part of recognized asset or the company has no more present obligation for recognized liability.
Under FASB conceptual framework, there are five measurement attributes based on which the value is determined for financial elements. These measurement attributes are current cost, historical cost, recent fair value, P.V of future estimated cash flows and NRV. Under IASB conceptual framework, there are four measurement attributes which are historical cost, fair value, fulfilment value and value in use and current cost. As per FASB conceptual framework, there are various assumptions which are used for preparation of financial statement such as economic entity, continuity, time period and monetary unit. Under IASB conceptual framework there are no such assumption exist for preparation of financial information. Under both the conceptual accounting framework, disclosure and presentation guidelines have been provided for the income statement, other comprehensive income and recycling. Both the standards have also defined the qualitative characteristics of financial information and report.
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