Why is the IASB revising the Conceptual Framework?
The IASB's existing Conceptual Framework was developed by its predecessor body, the International Accounting Standards Committee, in 1989. The material on the objective of financial reporting and on the qualitative characteristics of financial information was revised by the Board in 2010 as the result of a joint project with the US national standard-setter, the Financial Accounting Standards Board (FASB).
Although the existing Conceptual Framework has helped the IASB when developing and revising International Financial Reporting Standards:
- some important areas are not covered;
- the guidance in some areas is unclear; and
- some aspects of the existing Conceptual Framework are out of date.
In 2011 the IASB carried out a public consultation on its agenda. Most respondents to that consultation identified the Conceptual Framework as a priority project for the IASB. Consequently, the IASB restarted its Conceptual Framework project in 2012.
Exposure Draft
On 28 May 2015 the IASB published an Exposure Draft that sets out the proposals for a revised Conceptual Framework. The deadline for comments on this Exposure Draft ended on 25 November 2015.
The Exposure Draft has been developed in the light of the responses received on the Discussion Paper A Review of the Conceptual Framework for Financial Reporting, which was published in July 2013.
The reasons for the proposals in the Exposure Draft are summarised in the Basis for Conclusions that accompanies the Exposure Draft.
Who will be affected by a revised Conceptual Framework?
The Conceptual Framework is not a Standard and does not override specific Standards. Hence, the proposed changes to the Conceptual Framework will not have an immediate effect on the financial statements of most reporting entities. However, some entities could be affected by the changes directly if they need to use the Conceptual Framework to develop or select accounting policies when no IFRS Standard specifically applies to a transaction.
In future, the Conceptual Framework will guide the Board when it develops its Standards, so it will affect financial statements indirectly when entities implement new or revised Standards based on the revised Conceptual Framework.
What are the next steps in the project?
The Board will consider the comments received on the Exposure Draft when developing the revised Conceptual Framework. In the March Board meeting, the staff presented an analysis of the comment letters received and in its April meeting, the Board decided on the project direction. Since May 2016 the Board is redeliberating and aims to finalise the revised Conceptual Framework in early 2017.