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Development of Conceptual Framework is a Time Wasting Activity

Table of Contents


Neutrality in accounting1

Metaphors in accounting2

Inevitable subjectivity of accounting3

Economic behaviour5

Images in financial accounting5



Development of Conceptual Framework is a Time Wasting Activity


To answer the question as to whether the development of a conceptual framework is a time wasting activity or not, we first need to understand the benefits that the Financial Reporting regulation authority such as FSA have in mind when they draft the conceptual frameworks for reporting. The direct costs of regulation have to be assessed in relation to the benefits associated with financial regulation. The measurement associated with the benefits of financial regulations pertaining to the conceptual framework is not only difficult, but it is almost impossible to measure this benefit precisely (Deegan 2005, p. 167). The debate here is to understand whether the conceptual frameworks have managed to standardize the financial reporting procedures and rule out subjectivity from the field of accountant.

Neutrality in accounting

Accountants have the widespread perception that they have the power and the talent to represent things just as they are. The accountants are not the portrayers of reality in contrast they construct reality. The mere fact that the reality is constructed gives the idea that the reality as constructed by these accountants would be biased and subjective (Solomons 1991, p. 287). Hence, the conceptual framework limits the accountants' ability to construct this reality in a variety of ways.

The accountants just like the journalists should be the representor of news and not the creators of news (Solomons 1991, p. 287). This requires the accountants to choose the accounting policies that do not give the desired result but represent the true picture. If accountants fail to achieve this neutrality, their credibility will be a large question mark in years to come.

The conceptual frameworks are a waste of time in that they impede the accountant's ability to represent the true picture to the information users. For instance, it is in the best interest of the company and society as a whole that the company carries out research and development (Solomons 1991, p. 287). According to the conceptual framework that supposedly aims at safeguarding the rights of consumers in the financial services area, the accounting requires the auditors to record the research and development expense as incurred. This recording does not take into account the potential benefit that the company conducting research and development will have over the years. Hence, the income or the profit for the company goes down. This makes the smaller firms more vulnerable who are then susceptible to losses. Hence, a positive economic change in the form of technological advancement that could have been possible otherwise was impeded owing to the conceptual framework that did not protect the consumers (Tinker 1991, p. 298).

Metaphors in accounting

There are numerous problems faced by accountants in representing an unbiased view of the situation for which they have to report. For Solomon, accountants are like journalists whereas for Morgan they are not different from ...
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