Conceptual Framework

The International Accounting Standards Board and the US Financial Accounting Standards Board (the boards) are developing a common conceptual framework (i.e. a single converged framework) that is both complete and internally consistent and otherwise improves upon the existing frameworks of both boards. Such a framework would provide a sound foundation for developing future accounting standards and is essential to fulfilling the boards’ goal of developing standards that are principles-based, internally consistent, internationally converged, and that lead to financial reporting that provides the information needed for investment, credit, and similar decisions. The boards are conducting the project in eight phase s.

Is this project part of the Memorandum of Understanding?

No. However, this project was described in the Memorandum of Understanding. The work on the conceptual framework will inform both boards’ efforts to achieve the objectives described in the MoU. The MoU sets out a Roadmap of Convergence between IFRSs and US GAAP 2006-2008.

Click here for more information on the MoU.

Next due process step

Currently, four phases (A to D) are active.

Objective and Qualitative Characteristics (Phase A): The boards plan to publish an exposure draft in the second quarter of 2008 on the objective of financial reporting and qualitative characteristics of decision-useful financial reporting information, which will be Chapters 1 and 2 of the new, improved conceptual framework of the boards.

Reporting Entity (Phase D): The boards plan to publish a discussion paper in the second quarter of 2008 on the concept of a reporting entity, in the form of preliminary views with some alternative views.

Phases B, C, E and G: The boards expect to publish discussion papers to seek comments on the boards’ preliminary views arising from each phase which will be followed by exposure drafts.

Phase F: The boards will consider the status of each of their frameworks and whether one or both boards should change that status. The form of due process document, if any, is to be determined.

Due process steps completed

Stage 1: Setting the agenda

The IASB added this project to its agenda in October 2004.

Stage 2: Project Planning

The project is being conducted jointly with the US Financial Accounting Standards Board. The boards consult with their advisory councils for advice on broad strategic issues in the project. Project plans are updated, reviewed, and approved periodically, generally at the boards’ individual technical planning meetings and their joint meetings.

Stage 3: Development and publication of a discussion paper or an exposure draft

The boards published for comments a Discussion Paper, Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information on 6 July 2006. They have commenced their consideration of the comments received from constituents and redeliberations of the issues that were raised. They plan to issue an exposure draft in the first quarter of 2008.

The boards also anticipate publishing discussion papers arising from Phase B in the first quarter of 2009, and Phase C in the fourth quarter of 2008 and Phase D in the first quarter of 2008.

Estimated project completion

At the October 2006 joint IASB/FASB meeting, the boards agreed that each board, within the context of its current GAAP hierarchy, will finalise the common framework as parts (chapters) are completed and noted that later parts may include consequential amendments to earlier parts. The boards noted that the decision of how to finalise the joint framework may need to be readdressed when the boards discuss the placement of the framework within the IASB and FASB hierarchies. Timetables for two inactive phases (E and F) are to be established.

Further information

• Click here to download a comprehensive project update

Project contacts: