Beruflich Dokumente
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ACCOUNTING THEORY
(SUBJECT CODE: ECAU601401)
Chapter 4
A CONCEPTUAL FRAMEWORK
(Godfrey et.al. Accounting Theory 7th Ed)
Lecturer:
Mrs. Siti Nuryanah, S.E., M.S.M., M.Bus.Acc., Ph.D.
Group Member
1. Eggie Auliya Husna 1706105246
2. Fendhi Birowo 1706105290
3. M. Avisena 1506736064
4. Yolanda Tamara 1406612275
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CHAPTER 4
A CONCEPTUAL FRAMEWORK
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B. Objectives of Conceptual Framework
In 1978, the FASB Statement of Financial Accounting Concepts (SFAC) No. 1 paragraph
34 stated the following basic objective of external financial reporting for business entities:
“Financial reporting should provide information that is useful to present and potential
investors and creditors and other users in making rational investment, credit, and similar
decisions.”
The main objective of conceptual framework is to communicate financial information to
the users. Beside that, the other objectives could be described as follows:
1. Useful in making economic decisions;
2. Useful in assessing cash flow prospects; and
3. About enterprise resources, claims to those resources and changes in them.
In brief, FASB Conceptual Framework could be diagrammed in the No. 2 Qualitative
Characteristics of accounting information which is:
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C. Developing a Conceptual Framework
The development of conceptual framework is influenced by two key issues, which could
be briefly explained as below:
1. Principle-Based versus Rules-Based Approaches to Standard Setting
Principle-Based Rule-Based
IASB aims to produce principle-based Standards become rules-based because
standards and thus it looks to the they are inconsistent with the
conceptual framework for guidance conceptual framework of standard
FASB have traditionally been rule- setters
based Rule-based has benefits to increase
After 2002 Sarbannes-Oxley Act, the comparability and verifiability and
emphasis now being given to may reduce earnings management
principle-based
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FIGURE I
THE DECISION-THEORY PROCESS
Overall Theory of
Accounting
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4. Circularity of Reasoning
A superficial view of the conceptual frameworks indicates that accountants at least follow
one scientific path – that of deducing principles and practice from generalized theory. It
provides no specific guidance as to how this should be achieved.
5. An unscientific discipline
Conceptual frameworks may have attempted to adopt the deductive (scientific) approach,
but this approach is questionable if accounting does not qualify as a science to begin with.
6. Positive Research
Conceptual framework projects ignore the empirical findings of positive accounting
research. It will make a conflict with each other.
7. Policy Document
As a generalized body of knowledge, conceptual frameworks fail a number of scientific
tests. It perhaps just be a reflection of the dominant group’s will.
8. Self Preservation
Conceptual framework represents and implies the pursuit of self-interest.
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2. Objectives of Financial Report (Tujuan Laporan Keuangan)
Financial reporting should provide information that is useful to present and potential
investors and creditors and other users in making rational investment, credit, and similar
decisions and resource allocation for the entity.
3. Basic Assumptions (Asumsi Dasar)
Accrual Basis
Going Concern
4. Qualitative Characteristics of Financial Statements (Karakteristik Kualitatif Laporan
Keuangan)
Understandability
Relevance
Reliability
Comparability
Information relevance and reliability constraints
5. Elements of Financial Statements (Unsur Laporan Keuangan)
Financial position
Asset
Liability
Equity
Performance
Revenue
Expense
Capital Maintenance Adjustment
6. Recognition of Financial Statements (Pengakuan Laporan Keuangan)
Future Economic Probability
Reliable Measurement
Asset Recognition
Liability Recognition
Revenue Recognition
Expense Recognition
7. Measurement of Financial Statements (Pengukuran Laporan Keuangan)
8. Capital Maintenance Concept and Financial Maintenance Concept (Konsep Pemeliharaan
Modal dan Pemeliharaan Laba)
Financial Concept of capital
Invested money or invested purchasing power, capital is synonymous with the net
assets or equity of the enterprise
Physical Concept of capital
Operating capability, capital is regarded as the productive capacity of the enterprise
based on for example units of output per day