DEFINITION OF CONCEPTUAL FRAMEWORK

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A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent set of rules and standards. Specifically, in accounting, the rule and standards set the nature, function, and limits of financial accounting and financial statements.

In financial reporting, a conceptual framework is a theory of accounting prepared by a standard-setting body against which practical problems can be tested objectively. A conceptual framework deals with fundamental financial reporting issues such as the objectives and users of financial statements, the characteristics that make accounting information useful, the basic elements of financial statements (e.g., assets, liabilities, equity, income, and expenses), and the concepts for recognizing and measuring these elements in the financial statements.

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