Chapter 7 Conceptual Framework Project Describe content of

Chapter 7 Conceptual Framework Project • Describe content of CF • Understand how the new view of accounting is embodied in the CF • Evaluate the CF

Theory V FASB Conceptual Framework Project • • • Background and Overview The last and reigning theory Initial Agenda 1973, so… Head start? Single Most Important Project-cast and cost of thousands

FASB CF • A constitution…. to guide, be a frame of reference, determine bounds, help users, and improve comparability – Primary Beneficiary: FASB

FASB CF Contents • Overview – Ex. 7. 2 Components – Ex. 7. 3 Timeline – Ex. 7. 7 Summary • Consider each SFAC….

SFAC #1 • SFAC 1 Objectives 1978 • Trueblood but… • SFAC #1 contradiction.

SFAC #1 Contradiction • Discussion teams: do you swallow the explanation of the FASB? • Evaluation of SFAC #1:

FASB CF Contents • SFAC 2 Qualitative Characteristics 1980 – Identifies qualities that make info useful; if present, report info – Ex. 7. 5 • Evaluation: Tradeoffs?

FASB CF • SFAC 6, 1985 (was 3, 1980) Elements of FS • Ex. 7. 6, the 10 building blocks • A & L Primary • BS = IS? • CI? • SFAC 4 Non-Profit (N/A)

FASB CF • SFAC 5 Recognition and Measurement 1984 – Set of financial statements – Recognition criteria – Measurement criteria – No preference for measurement • SFAC 7, “Using Cash Flow Information and PV in Accounting Measurements, ” Feb. 2000

FASB CF • Flavor of the CF • 1. New Accounting Model • 2. Asset & Liability Income, not Income Statement and Matching • 3. Current Value emphasis • 4. Roots in M&S, ASOBAT, Trueblood, SATTA, etc.

FASB CF • Reformation vs counter-Reformation in SFAC 5. Miller, AH, 6/90 – reformation vs revolution vs counterreformation – result: status quo

Evaluation of CF • • • Closely Watched Evaluation and Concerns Cost and Time Use? Class CF Project…. Expectations gap? Miller’s myths…

Miller’s Myths • 8 myths about CF • What do they reveal?

CF Update • International CF? • Principles-based approach? • Revised CF?

FASB CF Difficulties • 4 Major difficulties

Theory Wrap-up: Why So Hard? • Four considerations