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Special Edition
Introduction
The IASB has published a revised Conceptual Framework that
clarifies and updates its existing guidance that was published in
1989 and updated in 2010. It also fills gaps in areas where there
was no or only little guidance.
The Conceptual Framework describes the objective of, and the
concepts for, general purpose financial reporting. Its purpose is to: Grant Thornton International Ltd comment
• assist the IASB in developing IFRS Standards that are based While the Conceptual Framework is not a Standard and
on consistent concepts will not override or change any existing Standards, it is
• assist preparers in developing accounting policies for fundamental that the IASB has a comprehensive and
transactions or events to which no Standard applies or consistent framework which it can use as a basis for
when a Standard allows a choice of accounting policy developing and revising IFRS Standards.
• help all other parties to understand and interpret the Standards. The revised Conceptual Framework provides much
The revised Conceptual Framework now contains a needed guidance on, for example, measurement and
comprehensive set of concepts, making some major changes reporting financial performance; areas that have not been
to the previous version. It now contains guidance on: sufficiently covered in the past. It also updates existing
chapters to tailor those to the needs of the IASB.
• measurement
• presentation and disclosure Although the Conceptual Framework is primarily for the
• the reporting entity use of the IASB, preparers will find it useful in developing
• derecognition. accounting policies for events and transactions for
which no Standard applies or when there is a choice of
It further updates the definitions of assets and liabilities and
accounting policy.
the guidance on recognition as well as clarifying the concepts
of measurement uncertainty, prudence, stewardship and
substance over form.
The chapters on the objective and the qualitative characteristics of useful information were published in 2010. Shortly before this, an Exposure Draft on the reporting entity was published.
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Since income and expenses are defined The IASB has previously stated that The Conceptual Framework further
as changes in an entity’s assets and the now superseded definitions have defines equity as a residual after
liabilities, these definitions have been worked well in the past. Therefore, it is not deducting an entity’s liabilities from its
updated slightly to reflect the wording surprising that no changes have been assets. However, the IASB has already
in the updated asset and liability made to Standards that use the ‘old’ expressed their intention to update this
definitions. definition of a liability like for example definition when it concludes its separate
IAS 37 ‘Provisions, Contingent Liabilities project on ‘Financial Instruments with
and Contingent Assets’ or IFRIC 21 Characteristics of Equity’.
‘Levies’. Although the Conceptual
Framework and IAS 37 and IFRIC 21
are now to some extent inconsistent,
the requirements in a Standard or
Interpretation will always prevail.
An entry value is described as reflecting prices in the market in which the entity would acquire the asset or would incur the liability.
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Consequential amendments and To avoid unintended consequences, Effective date and transition
effects on preparers preparers are therefore required to The Conceptual Framework is not a
Alongside the revised Conceptual apply the definitions of assets and Standard and will not change or override
Framework, the IASB has published liabilities from the 2010 Conceptual any existing Standards. It does not
‘Amendments to References to the Framework when accounting for business therefore have an effective date. It is
Conceptual Framework in IFRS combinations under IFRS 3. The IASB primarily a tool for the IASB to help them
Standards’. This publication updates plans to explore in due course how those develop Standards based on consistent
nearly all of the references to previous references can be updated without concepts. Over the last few years, the
versions of the Conceptual Framework having any effect on preparers of IASB has already started applying some
with references to the 2018 version. financial statements. of the new or revised concepts when
The IASB is confident that the updated developing or revising Standards.
references will have no impact on Also, preparers will continue to use the
preparers of financial statements and 2010 definitions of assets and liabilities However, entities that develop accounting
reminds them that the Conceptual when accounting for regulatory account policies using the Conceptual
Framework is not a Standard and does balances. This is because the IASB is Framework, or that are in any other
not change or override requirements of planning to replace its interim Standard way affected by the amendments to
any existing Standards. IFRS 14 ‘Regulatory Deferral Accounts’ IFRS Standards, will have to apply the
with a more comprehensive Standard in changes from 1 January 2020.
However, some references have not been the near future. Continuing to use the
updated in order to allow preparers to 2010 definitions means preparers will
continue applying the 2010 Conceptual not have to change their accounting for
Framework. In particular, IFRS 3 rate-regulated assets and liabilities twice
‘Business Combinations’ states that in within a short period of time.
a business combination, identifiable
assets acquired, and liabilities assumed,
must meet the definitions of assets and
liabilities in the Conceptual Framework.
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