Conceptual framework

Date recorded:

Conceptual Framework — Cover Paper — Agenda paper 10

The Board continued to discuss sweep issues arising from the review of the pre-ballot draft of the Conceptual Framework. The Board discussed the following topics in this session:

  • Sweep issue: concepts supporting the liability definition: AP 10A
  • Sweep issue: a flowchart for Chapter 1: AP 10B

Next steps

The Staff are working through other comments received on the pre-ballot draft and aim to publish the revised Conceptual Framework in Q1 2018.

Sweep issue: concepts supporting the liability definition — Agenda paper 10A


The pre-ballot draft sets out the definition of a liability, which require, inter alia, that the present obligation must have resulted from a past event. The pre-ballot draft also sets out further guidance explaining the ‘past events’ concept.

Feedback on the pre-ballot draft

Many reviewers were concerned that the current drafting does not correctly reflect the Board’s intentions regarding the past events concept. At worst, the current drafting could be interpreted as an entity’s having a present obligation for all future costs that it has no practical ability to avoid as a going concern—even costs that cannot yet be attributed to past events, including those relating to executory contracts that remain equally unperformed by both parties. Such a conclusion would be inconsistent with the Board’s previous decisions and with the fundamental concept that a liability must exist as a result of past events.

Staff analysis and recommendation

The Staff acknowledged these concerns and believed them to have arisen from drafting issues rather than a flaw in the Board’s previous decisions. As such, the Staff recommended resolving the issues via drafting and that there is no need for the Board to re-deliberate the past events concept.


The Board approved the Staff recommendation without any substantive discussion, except for drafting suggestions.

Sweep issue: a flowchart for Chapter 1 — Agenda paper 10B

Background and feedback on the pre-ballot draft

The Board has previously decided that the revised Conceptual Framework should maintain a single objective of general purpose financial reporting: to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors (‘primary users’) in making decisions about providing resources to the entity. In making those decisions, the primary users need information about how efficiently and effectively the entity’s management have discharged their responsibilities to use the entity’s resources, i.e. stewardship.

Several reviewers of the pre-ballot draft were of the view that the link between stewardship and the objective of financial reporting as intended by the Board is not clearly laid out in the draft.

Staff recommendation

In light of the above, the Staff recommended including a flowchart in Chapter 1 of the revised Conceptual Framework to illustrate the link between the objective of general purpose financial reporting and the information needed to meet that objective.


The Board did not approve the Staff recommendation.

Only three members supported adding a flowchart as they felt that the text is very dense and a flowchart could serve as a visual reminder of the sequence of thoughts that the text intends to reflect. However, the other Board members believed that it is redundant to have a flowchart as the text is clear and that only a few reviewers took issue with it. If the text is not clear, a better solution would be to revise the text and to keep it simple.

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