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ACCA comments on the IASB’s Conceptual Framework discussion paper

  • ACCA (UK Association of Chartered Certified Accountants) (lt green) Image

15 Jan 2014

The Association of Chartered Certified Accountants (ACCA) has published their response to the International Accounting Standard Board’s (IASB’s) Discussion Paper: (DP/2013/1) ‘A Review of the Conceptual Framework for Financial Reporting’. Whilst the ACCA are supportive of the review and revision of the Conceptual Framework (CF) and agree with a number of proposals within the Discussion Paper (DP), there are other areas where they suggest further work is required.

The IASB’s Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements.  The Conceptual Framework identifies the principles for the IASB to use when it develops and revises International Financial Reporting standards (IFRSs).  The DP was published in July 2013 and contained proposals for topical areas where it considered that amendments to the existing Conceptual Framework were necessary. Included in the DP were proposals to revise the definitions of an asset and a liability, to introduce guidance on derecognition, to clarify the objective and purpose of other comprehensive income and to set a framework for presentation and disclosure.  

The ACCA comment that the CF should “include coverage of the concepts of prudence and accountability”.  They comment: 

Prudence is built into the existing IFRS in a number of ways and has implications for the draft guidance set out in the discussion paper on the recognition of assets and liabilities.  Given this, it would be wrong for the concept not to be addressed and explained in the conceptual framework.  Accountability is referred to but it needs to be promoted to a position of at least equal prominence to the making of investment or credit decisions. 

The ACCA also highlight that the IASB should introduce concepts or principles within the areas dealing with the unit of account, derecognition and disclosures as they see that these are still “gaps” in the Conceptual Framework.  They comment that “while we agree that there needs to be a degree of flexibility for the IASB in the application of the framework”, the CF, as it currently stands, is “unsatisfactory”.  

The ACCA would also like a “more coherent definition of liabilities that brings together the approach to conditional liabilities, constructive liabilities and the economics of economic compulsion”, “clearer recognition filters” for asset recognition and more work to be performed on when to recognise items in profit or loss or other comprehensive income (OCI).  They comment: 

Clear principles for the presentation of items as either OCI and profit or loss are needed, as the rationale for the differing treatment is difficult to discern. 

The comments of the ACCA are largely consistent with those of the Financial Reporting Council (FRC) and the ICAEW who would also like the re-introduction of the concepts of prudence and accountability within the Conceptual Framework and greater clarity as to when to recognise items within profit or loss and OCI. 

The full comment letter can be accessed from the ACCA website below.  

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