What are the Disadvantages of Conceptual Framework?


The conceptual framework is a logical system of interconnected fundamentals and objectives applied in Financial reporting and Financial accounting. Followed primarily in accounting practices, this framework is responsible for maintaining a consistency in the principles of accounting and lays down its scopes and restrictions. CF serves as a standard procedure that can be implemented to resolve disputes. It helps to establish the criterion to formulate suitable practices of organizing and portraying accounting information. If you have any doubts regarding your accounting assignment, go ahead and ask academic experts who are well-versed with all the financial concepts and can help you with your assignments. These online essay writing companies can provide thoroughly researched, well-structured, unique assignments on the conceptual framework of accounting.

The origin of Conceptual Framework

With many countries adopting the conceptual framework for accounting and financial purposes, it would be interesting to find out where and when did this concept originate. The idea of CF originated in 1970s in USA. The FASB (Financial Accounting Standards Board) created the world’s most sophisticated CF. In 1975; the Committee on Corporate Report in the UK decided that all organisations must follow a specific set of financial accounting characteristics. The IASB (International Accounting Standards Board) developed its unique conceptual framework that portrays the fundamental concepts underlying the preparation of financial statements. The chief users of financial statements are equity investors, creditors, and lenders. The faithful representation and relevance of financial reporting information make the framework useful to these user groups.

Conceptual Framework of Accounting

A standard-setting federation develops a theory of accounting which is known as the conceptual framework. This framework is used to test practical problems. In simple terms, the conceptual framework can be defined as an array of objectives and principles which result in creation of a specific set of rules. These rules are interrelated in accounting. Therefore, the conceptual framework establishes the standard of core accounting practices and principles. The key objective for developing a conceptual framework is establishing new accounting standards. Besides its role as a theoretical framework, it also serves as a foundation for resolving accounting disagreements. Establishing conceptual framework is setting up of the fundamental standard codes. The need for developing a conceptual frame work arose as a result of the limitations in accounting and defective setting practice. The influences that come up at the individual level can render the entire process of standard-setting useless.

Advantages of Conceptual Framework

Some definite benefits associated with the financial framework of financial reporting are:

  • It facilitates the discussion of accounting problems and guides accounting standard makers. In accounting, the conceptual framework increases users’ confidence and perception about the financial reporting.
  • The framework provides a standard against which various core and dedicated accounting practices can be tested in an objective manner.
  • The framework of accounting offers all the basics of rationale and objectives.
  • It also offers the opportunity for developing decisions with a consistent approach. These decisions mainly concern the correct practice of accounting and various methods that support the accounting standards.
  • Implementation of conceptual framework enhances the reliability of financial reporting.
  • It also leads to improved communication between accountants and among the standard-setting federations.

Disadvantages of Conceptual Framework

Beyond doubt, the conceptual framework establishes the standards for main core accounting practices and conventions. However, this useful framework presents some limitations as well that are listed below:

  • It is extremely difficult to establish this framework. The rich and developed countries can have set up their own conceptual framework but the countries that are still developing find it extremely time consuming and expensive. This is the biggest limitation for setting up the framework. While developed countries can set up a dedicated framework for their accounting principles, the developing countries cannot afford to build a special accounting framework of their own.
  • The next biggest limitation is the rigidity that creeps into the standard accounting practices due to the implementation of the framework. This makes it impossible to introduce new ideas into the system. Conceptual accounting is associated with a lot of inflexibility. Some aspects of the conceptual framework cannot provide much direction to accounting. The design of conceptual framework is rigid, making it tough to incorporate new ideas.
  • Another disadvantage of following this concept is the conflict that may arise between the framework and the accounting standards that were already in use before the conceptual framework was introduced. The conflict can arise due to the difference in the practices prescribed by the preceding accounting standards and the latest conceptual framework. The already established standards occasionally differ from the fundamental principles of conceptual framework and thus, the conflict.
  • There is another limitation with following the conceptual framework. It is possible that the opportunity offered by the framework is not acceptable to all the parties. The framework may be beneficial to only some interested group of individuals who are recognized as users. On the contrary, the framework may present some opportunities that are not acceptable to other parties. Therefore, the same framework may not work for all the parties alike.

In a nutshell, conceptual framework lays down the nature, limitations, and different functions of financial accounting. It is due to these benefits that more and more students are choosing to study conceptual framework of accounting. The students have to write various assignments on the topic of conceptual framework as a part of their accounting course. However, only the students who have a complete knowledge of all the principles and concepts can write good quality assignments.

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