Conceptual Framework Phase A — Objective and Qualitative Characteristics

Date recorded:

The Board discussed the following issues:

How will new chapters fit with the existing Framework?

The Board considered the issue that when the Objectives and Qualitative Characteristics phase of the Framework Project is completed, Chapters 1 and 2 of the new Framework will be finished. Consequently, paragraphs 9-46 in the existing Framework - that is, the paragraphs of the existing Framework dealing with the objective and qualitative characteristics of financial statements - will be out of date. The Board discussed whether to:

  • Leave the existing Framework as it is, or
  • Withdraw paragraphs 9-46 in the Framework and make consequential amendments.

The Board decided for Phase A that withdrawal of paragraphs 9-46 would be preferable, with consquential amendments as needed.

Amendments to other parts of the Framework

The Board considered whether to replace the term 'reliability' in the recognition criteria in the existing Framework. The Board discussed at length arguments in favour and against updating the recognition criteria. The Board tentatively agreed not to update the recognition criteria. Staff were asked to conduct further analysis on paragraph 86 of the Framework to determine how the term 'faithful representation' may be applied.

Consequential amendments to existing IFRSs

The Board noted that when both Chapters 1 and 2 of the new Framework are finalised, there would be some inconsistencies between IFRSs and the new Framework. However, the Board decided not to amend IFRSs. Consequently, supporting materials from the Framework on 'reliability' will not be available. This approach follows the principle that the Framework should not override pronouncements.

Effective date

The Board discussed whether an effective date for the new Framework is necessary for the Board and constituents.

The Board concluded that, for its own use, an effective date is not needed when Chapters of the new Framework are completed. This is because the Board will want to start using the new Framework in standard-setting as soon as possible. The Board concluded, however, that for constituents an effective date for Chapters 1 and 2 would be useful. The Board did not specify a proposed effective date; however, the Board tentatively concluded that one year from the issue of the chapters would be a reasonable timeframe, with early adoption permitted.

The Objective of Financial Reporting

At the September meeting, the Board tentatively decided that the objective of general purpose external financial reporting is:

To provide financial information about the reporting entities that is useful to current and potential investors and creditors and others in making decisions in their capacity as capital providers.

The Board reconsidered this definition, specifically whether the term 'and others' should be included, or whether objective of financial reporting should be focused on the needs of the capital providers - the primary user. The Board did not make a final decision; however it asked staff to redraft the objective to refer to the fact that other users may make use of the information provided to investors and creditors.


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