REGULATORY FRAMEWORK IN ACCOUNTING
This framework was issued by the International Accounting Standards Board (IASB) to outline and explain the concepts underlying the preparation and presentation of financial statements for external users.
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The components of a set of financial statements include Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flow and Notes to the financial statements.
It should be noted that this framework is not an accounting standard and nothing in the framework overrides a specific accounting standard.
THE PURPOSE OF REGULATORY FRAMEWORK IN ACCOUNTING
The purpose of this framework is to
- Assist the IASB in the development of future accounting standards and in its review of existing accounting standards.
- Assist the IASB by providing a basis for reducing the number of alternative accounting treatments.
- Assist national standard-setting bodies in developing a national standard.
- Assist accountants to apply relevant accounting standards in preparing financial statement and in dealing with topics that do not form the subject of international accounting standards.
- Assist accountants in forming an opinion as to whether financial statements conform with relevant accounting standards.
- Assist users of financial statement in interpreting the information contained in financial statements prepared in conformity with International Accounting Standard.
ISSUES DEALT WITH IN THE FRAMEWORK
The specific topics discussed under the framework are as follows:
- The objectives of financial statements
- Users groups
- Assumptions underlying financial statement preparation
- Qualitative Characteristics of financial statement
- The elements of financial statements; their recognition and their measurement
- The concepts of capital maintenance
FAQs
The regulatory framework provides a set of rules and regulations for accounting. At the international level, the International Accounting Standards Board provides a broad regulatory framework of International Accounting Standards.
What is the framework of accounting regulation? ›
A regulatory framework is crucial in the field of accounting since it aids in the establishment of rules and procedures for financial reporting, so promoting the correctness, dependability, and comparability of financial data.
What are the regulatory frameworks? ›
A regulatory framework is a set of rules, regulations, and laws that govern the operations and conduct of a particular industry or sector. It provides a framework for how companies, organizations, and individuals must comply with certain standards and guidelines set by the government or other regulatory bodies.
Why a regulatory framework is needed in accounting? ›
To provide a standard for the diverse accounting policies and principles. To put an end to the non-comparability of financial statements. To increase the reliability of the financial statements. To provide standards which are transparent for users.
Is GAAP a regulatory framework? ›
At the core of the GAAP rules are 10 main principles that aim to standardize, define, and regulate the reporting of an organization's financial information. The 10 key principles are: Principle of Regularity: An entity's accounting must strictly adhere to the GAAP standards.
What is an example of an accounting framework? ›
Examples of financial reporting frameworks are generally accepted accounting principles (GAAP) in the United States of America, International Financial Reporting Standards (IFRSs), and special purpose frameworks (also known as other comprehensive bases of accounting [OCBOA]).
What is the purpose of the framework in accounting? ›
The main purpose of the Framework is to: assist in the development of future IFRS and the review of existing standards by setting out the underlying concepts. promote harmonisation of accounting regulation and standards by reducing the number of per mitted alternative accounting treatments.
What are regulatory standards in accounting? ›
In finance and accounting, rules, often known as standards, ensure that companies comply with the law and the practices of their particular industry. Most businesses need to comply with accounting and finance standards to keep accurate records and minimize the risk of wrong-doing.
What is the definition of regulatory framework in financial reporting? ›
A Regulatory Framework may consist of any or all of the following elements: ➢ Local or national corporate law. ➢ Local or national accounting standards published by an. appropriately authorised body. ➢ International accounting standards published by the International.
What is the regulatory approach in accounting? ›
This approach is based on the suggestion that accounting theory should be developed by first identifying the users of accounts and then finding out what information they require.
However, when accountants prepare financial statements, they generally adhere to these five principles.
- The accrual principle. ...
- The matching principle. ...
- The historic cost principle. ...
- The conservatism principle. ...
- The principle of substance over form.
What are the Golden Rules of Accounting? 1) Debit what comes in - credit what goes out. 2) Credit the giver and Debit the Receiver. 3) Credit all income and debit all expenses.
What are the four GAAP rules? ›
What Are The 4 GAAP Principles?
- The Cost Principle. The first principle of GAAP is 'cost'. ...
- The Revenues Principle. The second principle of GAAP is 'revenues'. ...
- The Matching Principle. The third principle of GAAP is 'matching'. ...
- The Disclosure Principle. ...
- Why are GAAP Principles important?
Components of the Accounting Framework
Several key components make up the accounting framework. Firstly, there are the Generally Accepted Accounting Principles (GAAP), which are a set of widely recognized accounting standards developed by the Financial Accounting Standards Board (FASB).
What are the accounting regulations? ›
Accounting Regulations means the accounting laws, statutes, regulations, rules, standards and systems promulgated by any Governmental Authority.
What are the two accounting frameworks? ›
US GAAP, which is overseen by the US Financial Accounting Standards Board (FASB) under the authority of the US Congress; and. International Financial Reporting Standards (IFRS), overseen by the International Accounting Standards Board (IASB), based in London.
What are the 4 aspects of regulation? ›
These core regulatory components—regulator, target, command, and consequences—affect the incentives and flexibility that a regulation provides.
