A conceptual framework is an important aspect of modern accounting.

Critically evaluate this statement and provide examples to illustrate your answer
Introduction
To understand the above-mentioned phrase and also to critically evaluate the same, first it is necessary to understand what is a conceptual framework and what is its importance to modern day accounting. Conceptual framework stands for the endeavor in order to delineate purpose of accounting. As a conceptual or abstract framework is created in order to fathom and deliberate all the practical as well as theoretical knowledge that surrounds the whole kingdom of financial knowledge, and using that knowledge form a footing that fortifies all of the accounting standards as a whole. The basis or framework involves of two different core constituents (1) being the intents of financial accounting and (2) the notions that are a result of following those intents. But having said that it becomes essentially important to justify the fact that the intents or objective flow from more open and to general to be more specific. The prime emphasis of the intents of conceptual framework contracts on to the possibilities in which the investors or stakeholders receive returns on their investments and then moves on the investments as entities and the performance of those entities which enable the stakeholders to analyze the entire cash flow process. Thus, bottom-line being that in which way the objectives are analyzed they will always have their focus on matters relating to wealth and what are the methods to maximize it. Now having said described the conceptual framework, it this time to dwell upon the rudiments, which build up the conceptual framework of accounting. There are a set of elements which serve as the building blocks of the conceptual frame work and these are namely, Assets, Liabilities, Revenues, Expenses and so on. As a result of these elements focusing on the entities economic reserves it shifts the focus entirely upon those resources, their changes and other central perceptions.

What it is without a framework?

Having described what is conceptual framework, and what are its elements, one has reached a point where one wonders what are the advantages of the conceptual framework of accounting and in what way does it benefit. But before dwelling upon that fact it would just be fair if to see the repercussions of the accounting world without a conceptual format. Accountants and brokers have asked this question for years as to if or not a conceptual framework is the answer to a set of financial statements, which are reliable, the answer is obviously Yes. Before the time of the conceptual framework there did exist some serious defects as to how the accounting standard were carried out all over the world. Firstly there wasnt any form of consistency specially in matching the prudence with the accruals. Secondly, transaction had a higher effect in terms of financial position upon the statement and sometimes it was more than how much it will affect the income of the statement. There were steps taken in order to introduce standards known as the fire fighting methods rather than determining the proper policy. That also included standard setting bodies being unfair in their composition and as a result for which it had an adverse effect upon the quality of the standards.

Advantages of a framework
Therefore from the above disadvantages it became very evident that the absence of a conceptual framework leads to a financial accounting system, which is very dogmatic and intransigent. So in terms of advantages, firstly it can undeniably be said that the conceptual framework allows one to make a better understanding of what is the general purpose of the fiscal information that is included in the financial reports. Secondly the conceptual framework endorses and endorses coordination and management among the accounting fraternity and along with that provides a base for indicating the most apt accounting conduct acceptable. Moving on the conceptual framework allows assistance in dealing with the different forms of transactions where not being able to be dealt with before the arrival of the conceptual frame work, along with that it also acts as a guide for creating more accounting criterions in the near future. Finally the conceptual framework is regarded as a controller and rheostat for the judge taken by the administration while preparing all the fiscal reports and other financial documents.

Reasons as to why the conceptual framework is important to modern day accounting.

Accountants and financial controller all over the world faced a lot of changes in terms of accounting as a practice and that happened during the decade in between 1960 and 1970, and this was a period where in there were a lot of developments be it the reporting requirements or even the different kinds of committees and organizations were formed. Some even went to the extent of creating their own conceptual framework but none could actually gain a satisfactory amount of popularity in order to become universally accepted, however as of the latest information collected it has been seen that the IASB (International Accounting Standard Board and the FASB (Financial Accounting Standards Board) have come in together in order to make a conceptual framework in order to develop future accounting standards. In the later 1970s the FASB had taken the initiative to develop a conceptual framework, which would end all the controversies that surrounded financial controversy and mid 1980s it was almost completed though one wrapped up which was left in the year 2000. The Statements of Financial Accounting Concepts (SFAC) has been created for the monetary exposure in terms of accounting for businesses by the FASB included the following concepts: SFAC No.1- Objectives of Financial Reporting by Business Enterprises (1978) SFAC No.2- Qualitative Characteristics of Accounting Information(1980) SFAC No.4-Objectives of Financial Reporting by Non-business Organizations (1980) SFAC No.5- Recognition and Measurement in Financial Statements of Business Enterprises (1984) SFAC No.6- Elements of Financial Statementsa replacement of FASB Concepts Statement No. 3 (incorporating an amendment of FASB Concepts Statement No. 2) (1985) SFAC No.7- Using Cash Flow Information and Present Value in Accounting Measurements (2000)

Stage1

Stage 2

Stage3

Fig. 1 conceptual framwork of accounting Fig. 1 shows the conceptual framework of accounting as developed by FASB, it is divided into three different stages where in stage one defines persistence and basis for financial reposrting, stage two contains qulaitative charachteristics in order to make the accounting information more understandable and stage 3 categorizes measurement and recognition according to certain definite notions

Stage 1 SFAC number 1

This happens to be the very base of this particular framework and contains basically the objectives of the framework. The main purpose behind this particular stage is to help potential investors and creditors with all the information required to form a particular entity. The reason as to why it is important is because it helps in creating a mindset of a basic level of acceptance and even adheres to guidelines

Stage 2 SFAC number 2,3 and 6

This stage comprises of both qualitative and financial elements and aspects. Primarily quality, consequence and consistency are mainly taken into consideration as information is said to be reliable only when it accurate and faithfully represented. Other qualities include relevance, reliability and comparability but mainly apply to items such as assets, liabilities, revenues, losses and so on.

Stage 3 SFAC number 5,7

This particular stage can also be called as a continuation of stage one itself as it mainly consists of objectives discussed at stage one and also acknowledging how and when will the elements be measured and reported. This is also divided into two parts that is the plain principles and the expectations. Expectations are then yet again split into Economic Entity, Monetary Unit, GoingConcern and Periodicity and on the other hand principles cover areas such as Historical Cost Principle, Revenue Recognition Principle, Matching Principle and Full Disclosure Principle.

Conclusion
As it obvious from my report that the pros outweigh the cons i.e. the accounting fraternity with a conceptual frame work better off than being without one and that the benefit of having a conceptual framework for accounting allows accountants to have a sound foundation to stand upon and carry out their responsibilities. Though conceptual framework has played a huge role in an integral section of development of accounting, it goes without saying that the IASB and the FASB working jointly will not only come up as a step in the positive way for the development of accounting which would further help in strengthening the entire framework. Thereby with this point I would like to draw conclusion to my answer, hoping that with my research and knowledge I was able to bring in enough justice to the point that a conceptual framework is indeed an important aspect for modern day accounting. Introducing with what exactly is conceptual framework, then looking at the disasters of accounting fraternity without a conceptual then comparing its advantage and finally picking up the framework itself to show its importance to financial and cost accounting.

Bibliography
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Articles Stuart Crainer. (2010). Teacher from the dark side; Financial accounting is far from dull, finds Stuart Crainer. The Times. London (UK) (1), 11. Jennifer Hughes. (2008). Accounting rule-makers attacked for putting theory before reality. Financial Times. London (UK) (1), 17.

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