UK How do I apply the 2018 Conceptual Framework to a company's published financial statements?


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Hi all,

I would really appreciate some guidance about which parts of the IASB's Conceptual Framework influence the information published in a company's annual financial statements.
As the conceptual framework is relatively simple and not a standard itself I am wondering about how I can analyze its influence when I look at the published financial statements of a company?

I hope that make sense and many thanks!
 
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Fidget

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The operative word is "conceptual". So it's the foundation upon which accounting standards are based. Amongst other things, it defines the elements of financial statements: assets, liabilities etc and is a guideline to be used.

It's more geared towards the prepares of financial statements and any auditor who comes along to form their opinion on them. So it's not really designed for anybody to just pick up any set of financial statements and be able to apply the framework to them. And that's because you don't have the insider knowledge of how something came to be treated as it was in the accounts. You can glean some of that from the notes to the accounts, but in my opinion, analysing whether or not the framework is/has been correctly applied requires being privvy to all the transactions/judgments/estimates/rationale making up the accounts.

External audit goes some way to doing that for any third party because they are privvy to the required detail needed in forming an audit opinion.
 
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Werner Reisacher

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Whether you are reporting under IASB or GAAP, the purpose of the published statements is to give the shareholders a clear picture of the present and future financial situation of the company. This requires, that any potential liability exposure, high currency exposures, supply chain risks and others issues that could influence the investors' decisions, need to be highlighted and explained in details. Consequently, as Fidget concludes, the professional input from all decision makers in the business cycle is need to make sure, that all processes that influence productivity and profitability of a company are covered.
 

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