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The Pursuit of The Conceptual Framework: 1. Paton William
The Pursuit of The Conceptual Framework: 1. Paton William
MY NOTES
CHAPTER 2
The pursuit of the conceptual framework
The Conceptual Framework Project (CFP) developed to guide standards and resolve
accounting issues.
The Early Theorists
First attempt to develop accounting theory began with:
1. Paton William
Change in assets and liabilities should be reflected in the Financial
Statements on a current value basis.
Returns to investors (dividends and income) were distributions of income.
2. Canning John
Asset valuations and measurement were based on future expectations.
Match revenues and expenses were based on future expectations.
Scott and Veblen viewed the industrial revolution as changing fundamental that
caused managers to look for new methods of maintaining organizational control.
Scott framework includes hierachry of postulates and principles used in the
development of accounting rules and techniques are:
Orientation Postulate
Consideration of current, social, political and economic environment.
Level 1
Pervasive principle of Justice
Developing accounting rules that offer equitable treatment to all users of
financial statements.
Principles of Truth and Fairness
Presenting accurate information and attributes of objectivity, freedom from
bias and impartiality.
Principles of adaptability and consistency
Being able to change accounting in reference to economic conditions and
maintaining consistency in accounting rules.
Level 4
* Investments by owners
* Distributions to owners
* Comprehensive Income
*Revenues
* Expense
* Gains
PRINCIPLES- BASED
Present enforcement difficulties
Little guidance or structure
Better able to cope with speed of
RULES- BASED
Provide a vehicle for
circumventing the intention of
the standard
More workable in large, complex
judgement
NOTE:
implementation