The enforcement of the IFRS foundations: analyses and perspectives
1. Introduction
The paper focuses on the difference between the importance given to the set of theoretical
foundations of accounting standards, the so-called conceptual framework, and the authority
recognized in it in reality. Attention will be given to the status and enforcement of the conceptual
framework, derived from the purpose assigned to it, in an accounting system based on standard
settings, the “natural” environment for a conceptual framework, and in a system based on legislative
regulation where the framework could represent a redundancy.
To this aim the paper analyses the content of the 1989 IASC Framework, the revised version
coming from the IASB-FASB joint project, in 2010, and the premise of the announced Discussion
Paper, expected July 2013, as a result of the only-comprehensive IASB project.
Final results of the analysis show a substantial status quo notwithstanding the evolution of the IFRS
Conceptual Framework regarding the authority given to it.
On the European regulatory side this changing situation contributes to inconsistencies requiring new
intervention into the endorsement process by means of adjustments in stated evaluation criteria.
The perspectives offered by the new context in which the IASB Conceptual Framework is being
revised could represent a valuable opportunity to make the conceptual framework authority
undoubted and its enforcement effective.
2. The importance of the theoretical foundations in the accounting literature
In general terms a conceptual framework is “a statement of generally accepted theoretical principles
which form the frame of reference for a particular field of enquiry” (Dovies, Paterson, Wilson,
1994). In any field of study or activity, including financial accounting, there are a number of
reasons for developing a conceptual framework, which is a collection of broad rules, guidelines,
accepted truths, and other basic ideas about the field (Miller & Reading, 1986). Looking for there is
no definitive or absolute definition of such a conceptual structure (Deegan, 2012).
Taking an extensive view a conceptual framework is intended to perform any function from simply
helping to define a discipline to developing a full comprehensive, analytical framework for the
discipline (Solomon & Solomon, 2005). This view is agreed by great part of the accounting theory
literature that considers, and adopts, a broad definition for a conceptual structure coming from the
first official experience in building an accounting theoretical frame, that is the conceptual
framework of the Financial Accounting Standards Board. According to the FASB Statement of
Financial Accounting Concept n. 1, the conceptual framework is “a constitution, a coherent system
of inter-related objectives and fundamentals that can lead to consistent standards and that prescribes
the nature, function and limits of financial accounting and financial statements” (FASB, Sfac 1,
1978; Deegan, 2012; Scott, 2005; Godfrey et al. 2010). The framework is compared to a
constitution for the standard-setting process in the sense that alternatives to it can be viewed as
either within the law or outside of the law (Solomons, 1986, p. 114). Then it is supposed to embody
a logical foundation for deductively deriving appropriate and consistent accounting standards and
so to guide in resolving disputes that arise during the standard-setting process by narrowing the
question to whether or not specific standards conform to the conceptual framework (Belkaoui,
2004, p. 173). Objective and fundamentals of financial accounting contribute in defining the same
accounting discipline. At the end it represents an attempt to provide a metatheoretical structure for
financial accounting 1 , taking into account that nobody would argue that the framework always
points to a single solution to every accounting issue on which everybody could agree, but it shifts
the debate away from popularity contests of current practices (Cairns, 2001, p. 18).
1
Although it could be criticized from the standpoint of confusing means and ends in order to maintain the status quo
(Archer, 1993, p. 80)
The elaboration of a conceptual framework is a recent activity by standard setters. For many years
accounting standards were developed in many countries in the absence of a conceptual frame
solving one accounting issue at a time and so adopting a piecemeal approach. Because not enough
tidy rationality has been used in the process of accounting policymaking, critics have cited a need
for a conceptual framework (Horngren, 1981, p. 94-in Deegan 2000). Actually one of the benefits2
associated with having a conceptual framework, which represents the reason for a framework,
includes the development of accounting standards more consistent and logical because they are
developed from an orderly set of concepts instead of being ad hoc developed. Another advantage is
the accountability of standard-setters decisions processes: the thinking behind specific requirements
as well as the departures from the concepts or any compromises in the accounting standards should
be more explicit and so more understandable. The consequent overall transparency of standardsetting process will then enhance the communication between standards setters and their
constituents (preparers and auditors will be able to better understand the financial reporting they
face) and should alleviate some of the political pressure exerted when accounting standards are
developed. The existence of a framework then, makes more economical the development of
accounting standards because the concepts, guiding the decision making, allow a precise and not
redundant standards elaboration thus minimizing the costs and also the risk of over-regulation.
A part from the advantages connected with the same theoretical reason of existence of the
conceptual framework, some doubts on the usefulness of that structure have been highlighted by the
literature.
The strongest criticism concerns the view of frameworks as a means of legitimizing standard setting
bodies. According to this position the conceptual structures are perceived as created primarily to
provide benefits to the parties that actually develop or commission them and used as devices to help
ensure the ongoing existence of the accounting profession by boosting their public standing
(Dopuch and Sunder, 1980). Furthermore conceptual frameworks provide a means of increasing the
ability of a profession to self-regulate, thereby counteracting the possibility that government
intervention will occur (Hines, 1991). In synthesis the development of conceptual frameworks is
conceived as a political action to ensure the survival of the profession. Connected to this is the
perception that they are too descriptive of existing practice which they attempt to legitimize
(Gaffikin, 2008). Other criticisms deny some of the presumed benefits affirming that frameworks
are not operational, because of a great level of abstraction, are costly to develop and open to many
forms of political interference. Due to the fact that their degree of progress has in recent years been
rather slow and disappointing someone is wondering if it is worth continuing with them (Godfrey et
al., 2010). Effectively massive amounts of resources, delays and political pressure and incomplete
results distinguished the US, Australian and Canadian conceptual frameworks.
The building of theoretical frames in accounting is an experience of the common law countries, the
anglo-saxone world, where the regulation of accounting is in the hands of the profession. In civil
law countries the accounting regulation is formulated by the legislator on a legal base and a
theoretical reference is not perceived as necessary. Indeed European code law countries express
doubt about their ability to base accounting standards on a framework in view of their dependence
on commercial and accounting systems in the law (Cairns, 2001, p. 16).
A framework, aiming to provide a structured theory of accounting, is developed in a particular order
providing a hierarchy of building blocks where the higher determine the development of the lower.
At the highest theoretical level: it states the scope and objectives of financial reporting. At the
conceptual level it identifies and defines the qualitative characteristics of financial information and
the basic elements. At the lower operational level it deals with principles and rules of recognition
and measurement of the basic elements and the type of financial information to be displayed
2
These benefits are described by the accounting literature (as for example Godfrey et al., 2010 and Deegan, 2012)
taking into account those identified in 1995 by the Australian Accounting Standards Board and the Public Sector
Accounting Standards Board in the Policy Statement 5-The Nature and Purpose of Statements of Accounting Concepts.
(Godfrey, 2010). The above construction characterizes at the moment all the conceptual frameworks
developed by standard setters.
Given the portrayal and functions described by the accounting research world it follows that an
accounting conceptual framework is undoubtedly a preeminent meta-structure to which the
elaboration and application of accounting standards have to make constant reference. The
conformity to the conceptual framework has to drive the entire standard setting process. This is
necessary to maintain an accounting system coherent and reliable, and ultimately to validate it.
From the important purpose assigned to the conceptual framework, that is to be the inspiration
source of accounting standards, descends the status of it in an accounting system: an authoritative
status. A diverse position, less authoritative, would weaken the framework importance and therefore
its proper role and connected meaning.
The framework is positioned at the top of the standard setting process and consequently of the
specific results of it, the standards, in a vertical order. A verticality of the authoritative status can be
inferred between the components of the framework. The hierarchy among the blocks (components)
forming a framework ensures dominance of the fundamental postulates compared to other general
principles, in a descendant order of superiority. Logically as each blocks derives from the previous
one, the previous is a binding higher principle or set of principles. In this sense the objective of
financial reports generates qualitative characteristics and the latter must be interpreted taking into
account the given objective and so on. In the opposite direction, the objective given to financial
information corresponds to the most authoritative concept among those expressed in a authoritative
framework.
3. The 1989 International Framework for the preparation and presentation of financial
statements
In 1989 the IASC (International Accounting Standards Board) produced its proper conceptual
framework, called Framework for the Preparation and Presentation of Financial Statements which
constituted, and still represents, the first supranational intervention in the matter. In April 2001 the
Framework, as well as all the then existing International Accounting Standards, were adopted by the
IASB (that substituted the IASC).
The framework sets out the concepts that underlie the production and communication of financial
statements for external users. The wider original scope, not limited to financial statements but
aiming at considering the financial reporting, was soon dismissed.
The framework has been extensively influenced by the existing US and other national conceptual
frameworks and this is reflected in the frame articulation which considers the well-known blocks of
objectives, qualitative characteristics, elements definition, recognition, measurement and so on.
Unlike other theoretical projects the IASC Framework took a short time to be produced and
completed.
In the Framework the first paragraphs are dedicated to the “Purpose and status” as to affirm their
relevance in the whole structure. The Framework purpose is described in a quite broad way and it
includes: a. to assist the IASC/IASB in the development of future IASs/IFRSs and in its review of
existing IASs/IFRSs; b. to assist the IASC/IASB in promoting harmonization of regulations,
accounting standards and procedures relating to the presentation of financial statements by
providing a basis for reducing the number of alternative accounting treatments permitted by
IASs/IFRSs; c. to assist national standard-setting bodies in developing national standards; d. to
assist preparers of financial statements in applying IASs/IFRSs and in dealing with topics that have
jet to form the subject of an IAS/IFRS; e. to assist auditors in forming an opinion on whether
financial statements comply with IASs; f. to assist users of financial statements in interpreting the
information contained in financial statements prepared in compliance with IASs/IFRSs; and g. to
provide those who are interested in the work of the IASC/IASB with information about its approach
to the formulation of IASs/IFRSs.
The first point is that one representing the framework principal function and all other could be
considered logical derivations, as for example supporting preparers, auditors and users in general.
The specific issues related to the harmonization focus of the International organization (point b.)
extend to encompass the accounting convergence through the influence on national regulations. In
fact, compared to national domestic experiences, the development of an international conceptual
framework may be seen as either an attempt to provide the standard setting process with increased
status or as a necessary step towards re-establishing the authority of the drive towards
harmonization which is such an important part of the IASC/IASB mission.
Contrary to expectations, the status of the Framework is not aligned with the purpose of it.
Paragraph 2 states that the framework “is not an International Accounting Standard/International
Financial Reporting Standard and hence does not define standards for any particular measurement
or disclosure issue” and “nothing in this framework overrides any specific International Accounting
Standard/International Financial Reporting Standard”.
The fact that the framework is not itself a standard is quite obvious as it represents something that
is a higher level but what is surprising and inconsistent with the framework purpose is the lower
place reserved to it, compared to the standard which is supposed to have led the development.
Furthermore “in those cases where there is a conflict” between the Framework and a standard “the
requirements of the International Accounting Standard/International Financial Reporting Standard
prevail over those of the Framework” (par. 3).
The actual subordinate position of the framework in the case of conflict with the standard could be
attributed to a “time” reason. It could be justified by the fact that the 1989 Framework is subsequent
to the formulation of international accounting standards by the IASC. The International body started
the formulation of the IASs in 1974 and therefore the a posteriori insertion of a conceptual
framework needs time to produce the hoped for results. The Framework effects should
prospectively affect the IASs as, par. 3, “the Board of IASC will be guided by the Framework in the
development of future Standards and in its review of existing Standards” and consequently “the
number of cases of conflict between the Framework and International Accounting Standards will
diminish through time”. It is therefore a kind of temporary misalignment before reaching a
consistency of the accounting system. The standards not compliant with the framework and waiting
to be revised according to it are named “broadly stated requirements” whereas the standards in line
with the concepts are called “principles-based” (Wells, 2011, p. 304).
After the framework promulgation its use in practice was quite fluctuating. According to Cairns
(2001) initially the IASC showed some reluctance to use its framework in developing and revising
standards. After a board discussion in June 1992 the IASC started in supporting its own framework;
many board representatives argued that the international organization should use its framework
rather than develop “opportunistic standards” with the result that the theoretical blocks have played
an increasingly important part in the IASC activity and the framework-based approach affirmed
(Cairns, 2001, p. 10). The US standards setter, on the contrary, behaved differently and used its
conceptual framework with the intention of supporting its job but not to do its job for it (Cairns,
2001, p. 15), although different opinions insist in believing that standard setters do apply the
conceptual framework in making standard setting decisions (Barth, 2007, p. 7). Conceptual
frameworks are not always used in setting standards (Dopuch and Sunder, 1980, p. 18) and
sometimes they represent a strategic means to assist in socially constructing the appearance of a
consistent differentiated knowledge base for accounting standards “thus legitimizing standards and
the power, authority and self-regulation of the accountancy profession” (Hines, 1989, p.85).
The actual use of the IASB Framework in producing and revising standards is an indication of its
effective and acknowledged authority, and it is not a case that the FASB conceptual framework is
labeled as non-authoritative source for determining standards within the US accounting system
(Walk et al., 2013, p. 252). However the presumed authority of the IASB Framework is reduced to
the extent that the reference to it is oscillating. Extensive use of the IASB Framework has been
made in projects on intangible assets, income taxes, provisions, agriculture and financial
instruments as well as in formulating interpretations. But during the Improvement Project (19901993) the preference shifted more towards current practice although much efforts were devoted to
changes to the language of revised standards to bring them into line with the Framework (Cairns,
2001, p. 12). Eventually some standards conflicting with the Framework still remain (Bradbury,
2003).
As said above the international accounting standards developed by the IASC/IASB existed long
before an explicit conceptual framework was promulgated. That conceptual framework has been
developed from existing accounting standards although it was used to develop new accounting
standards and revise or amend existing ones. “This implies that the relationship between the
development of a conceptual framework and the setting of accounting standards is not asymmetrical
” (Xiao and Pan, 1997, p. 284). It means that both, framework and standards, have a reciprocal
generating capacity in a sort of recursive relation. But this is not the predicted pattern coming from
an authoritative framework, which is normative and not descriptive in nature, and it clearly implies
an ambiguous relation between the concepts and the standards due to the fact that there will be
always a revised framework after new and revised standards as “the Framework will be revised
from time to time on the basis of the Board’s experience of working with it” (par. 4).
An innovative rationale could be considered to tentatively explain the odd status reserved to the
IASB Framework. The bizarre predominant position of the standards above the framework, in case
of conflict, could be explained with the intention to give innovative potential to the whole
International accounting system. Through the specific and updated standards the system introduces
and includes necessary and opportune novelties, despite the obviously unchanging framework, so
conferring on innovative capability to the entire international accounting system, thus allowing it to
improve in response to the users information needs and the dynamism of the economic
environment. Departures from the conceptual framework could generate, taking a cue from the
Wells terminology, a sort of “innovatively stated standards”. The innovation will be then absorbed
in the next framework revision.
Important signals of the primary position of the IASB conceptual framework can be detected into
the provisions of the international accounting standards system. The Preface to IFRS (2002-2007)
stated that “IFRSs are based on the Framework, which addresses the concepts underlying the
information presented in general purpose financial statements. The objective of the Framework is to
facilitate the consistent and logical formulation of IFRSs. The Framework also provides a basis for
the use of judgment in resolving accounting issues” (par. 8). In the IAS 1, on Presentation of
Financial Statements, apart from the requirement of a reference to the framework concepts in order
to obtain an entity “fair representation”3, there are frequent references to the objectives of financial
statements set out in the framework to decide for departures from the standards requirements (par.
19, 23, 24). In this sense to the framework is acknowledged an interpretative function in line with
its purpose and authoritative status. In 2003 IAS 8 on Accounting Policies introduced a hierarchy of
source by which an entity should choose its accounting policies: in the absence of a specific
standard addressing an issue, an entity is required to look at the IASB Framework (par. 10, 11). The
integrative role of the theoretical structure is acknowledged. But only when IFRSs do not specify
the accounting for a particular transaction or event, and the accounting for such a transaction or
event cannot be determined by analogy to the requirements for similar items in accordance with
IFRSs, is the conceptual framework used to determine an entity’s accounting policy for that
transaction or event (Wells, 2011, p. 305).
At this point it is convenient to give a summary of elements contained in, or related to, the IASB
Framework that could read in favor or against its authority. Contribute to an increased status the
“temporary” and “innovative” explanations of the prevalence of the standard over the framework in
3
«Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the
Framework», IAS 1, Presentation of Financial Statements, par. 15.
case of conflict as well as the recognition of the interpretative an integrative role of the framework
(although external because coming from IASs/IFRSs). Do not contribute to enhance the authority
the fluctuating use and the questioning of the framework, in producing and reviewing standards, and
the recursive model in generating the framework as it absorbs much practice and its normative
nature is impaired.
4. The 2010 IASB Conceptual Framework
In 2010 the initial two chapters of the IASB Framework changed because of the conclusion of the
first phase of the IASB-FASB joint project, named Objective and qualitative characteristics,
initiated in 2004. The IASB and the US FASB were working on a joint project designed to update
and align the two boards’ conceptual frameworks. The aim of the project, based on existing
frameworks, was to update, improve, fill in gaps and converge standards. The adopted approach did
not focus on a comprehensive reconsideration of all concepts, but on improving existing
frameworks and achieving their convergence as the IASB and FASB considered their existing
frameworks broadly appropriate: momentum was lost for an authentic revision, responding to the
dynamics of the economic world, instead of amendments coming from the sum of two thirty-year
frameworks.
The IASB and FASB Conceptual Frameworks presented similarities as the IASB conceptual
framework is US based (Alexander & Nobes, 2010, p. 36) but also significant differences. In fact,
the purpose assigned to the FASB conceptual framework was focused on assisting the board in the
process of standards preparation and revision, whereas the IASB framework was asked to support
the board, national standard-setters, preparers, auditors, users, and interested parties. But the major
difference lay in the frameworks status as the FASB frame represents a non authoritative source and
the IASB could be considered an authoritative source referring to the interpretation and integration
function.
These differences were not settled in 2010 because the “Purpose and Status” issues, as part of the
joint project, was planned to be addressed in the sixth phase of the project, that is in the long run.
The position in time reserved to that basic part of the framework casts a shadow on the effective
importance acknowledged to it. The lack of intervention cannot be interpreted as a confirmation of
the present provisions because of the differences emerging from the IASB and FASB comparison
but mainly as a postponed intention4. The delay could be attributable at the persuasion, requiring
surely a great amount of time, that “as the FASB-IASB project progresses towards converged
frameworks, we expect movement of the conceptual framework into the FASB Accounting
Standards Codification” (Wolk, 2011, p. 252), that is into the US authoritative sources. The relevant
amount of time presumed for the revision of the whole conceptual framework, and the consequent
massive financial resources to be invested, are in contradiction with the absence of an early decision
on the status of that theoretical structure.
The IASB-FASB joint project on conceptual framework was suspended in November 2010.
According to the IASB opinion5 the original plan was not achieved because the phased approach
made it difficult to make decisions and not completed to allow boards to focus on other key projects
like financial instruments revenue recognition, leases and insurance contracts.
In September 2012 the IASB announced to carry on the revision of the framework on its own
through the “IASB-only comprehensive project”. Since then the prospective steps can be deduced
from official announcements and staff documents.
The phased approach has been abandoned and a discussion paper, covering all areas, is expected by
July 2013 and the completion of the revision for 2015. The whole reconsideration of the framework
seems to be the only right approach in order to obtain a set of concepts to be used as a whole, and
contextually, in the standards elaboration and revision, so reducing the number of “broadly stated
requirements” due to partial revisions. The 2010 revised result did not generate changes at the
5
IFRS Staff paper, September 2012.
moment in the existing IASs/IFRSs and probably a postponement in its binding effectiveness,
aiming at making the entire revised conceptual framework effective on a single date, would have
been more appropriate. Also a reconsideration of the 2010 decisions in the context of the new
situation would sound properly.
The IASB-FASB cooperation on the subject has been substituted by a cooperation between IASB
and national and regional standards setters and bodies recently organized in the newborn ASAF
(Accounting Standards Advisory Forum), an advisory body providing technical advice and
feedback to the IASB. ASAF will play an important part in helping the IASB to understand how the
standards function in a community6.
This diverse environment, no more focused mainly on the US context, but giving importance to
national standards setters other than FASB7, could justify a reconsideration of the 2010 revision in
the same discussion paper. But the IASB is oriented towards not reopening the phase one
achievements.
An early draft of a part of the discussion paper, dated February 2013, considers the purpose and
status of the conceptual framework8 . The draft recommends a narrower purpose for the framework
focusing on its primary function: to assist the IASB in the development of future IFRSs and its
review of existing IFRSs. The IASB believes that focusing on these needs will help to define what
is, and is not, included in the revised framework9. The framework may also assist the preparers of
financial statements in developing accounting policies for transactions and events not covered by
existing standards. If this is confirmed, the interpretative function acknowledged to the IASB
Framework would be no more coming from outside (from IAS 8) but would be internal to it as an
important feature increasing its authority.
As for the status of the framework, the draft re-proposes that nothing in the framework should
override the requirements of specific IFRSs. In a limited number of cases “there may be a conflict
between the conceptual framework and an IFRS. In these rare circumstances the requirements of the
IFRS prevail over the conceptual framework. However, because the conceptual framework will lead
the IASB when it develops new IFRSs and reviews existing IFRSs, the number of conflicts between
the framework and IFRSs will diminish through time”10. Here again the draft does not propose to
change the present position. “In rare cases the IASB may decide it needs to depart from some
aspects of the conceptual framework in order to meet the objective of financial statements. Where
this happens, the IASB will clearly state that it has departed from the framework and explain
why”11. But having the objective of financial information the highest position into the framework,
to meet this objective it means to affirm the framework authority.
The new perspective, a part the stated interpretative role of the framework, does not seem to
substantially change the IASB framework status and it is possible to talk about a sort of status quo
that denies the function and reason for its existence.
The adoption of the IASs/IFRSs system in Europe, through the regulation 1606/2002, brings into a
legal system characterized by legal certainty, all the above uncertainties related to the conceptual
framework status.
5. The status of the conceptual framework in the European legal system
Although a regulatory system is law based, a contamination with standards elaborated by not
legislative organizations can occur. It is a frequent feature that private actors play a key role in
global governance. Public regulatory regimes increasingly connect with private ones accepting their
6
Hans Hoogervorst, chairman of the IASB, in a discourse at the Cass Business School (17.01.2013).
The advantages of a situation of national standards setters and regional bodies other than FASB, as more relevance
and resources saving, are highlighted by Hague (2006).
8
IFRS Staff paper, 18-22 February 2013.
9
Ibidem, p. 2.
10
Ibidem, p. 3
11
Ibidem, p. 2
7
rules (Hall and Biersteker, 2002; Graz and Nolke, 2007). Reasons for the hybrid public-private
regulation could be the attempt to fill the lack of expertise of public institutions on technical
knowledge and innovation and to prevent the costs of autonomously generating them (De Bellis,
2010). European and International intergovernmental organizations use international standards and
rules coming from private entities through the traditional incorporation or reference models or,
more recently, through mixed ones (Leebron, 2002). In general terms, through the incorporation
model rules or standards elaborated by private bodies are copied into the law, becoming part of the
legal system, whereas in the reference model what is referred to is a source of law and normative
provisions that stem from it.
The hybridization public-private in 2002 involved the European accounting regulation. Through the
Regulation 1606/2002 the EU included international accounting standards (IASs/IFRSs) produced
by the private body IASB in the European accounting legislation12 adopting a mixed model between
incorporation and reference. A complex endorsement mechanism make accounting standards
formulated by a private organization gaining European legal recognition and binding force. The
existing International standards were endorsed and also the subsequent new and revised standards13.
Instead, the theoretical base on which they are elaborated, the Framework, has not been considered
for endorsement.
In the regulations 1606/2002 the reference to the International accounting standards which are
foreseen to be used in Europe is very clear: the IASs and the IFRSs, their modifications and
interpretations. No mention is however made of the conceptual framework from which the
principles arise; for this the set of postulates and general principles are not applicable in Europe as
other standards are. The norm states that “For the purpose of this regulation, ‘international
accounting standards’ shall mean International Accounting Standards (IAS), International Financial
Reporting Standards (IFRS) and related Interpretations (SIC-IFRIC interpretations), subsequent
amendments to those standards and related interpretations, future standards and related
interpretations issued or adopted by the International Accounting Standards Board” (art. 2).
The choice made by the EU seems to be based on the technical contents rather than the
philosophical basis of the international accounting system, as if the EU was not interested in this
philosophical basis and in fact the basis is disregarded in the EU regulation. Indications and
comments on the fact that the framework has not been endorsed by the academic world are often
found despite the fact that the framework has not even been cited in the regulation to the point of
ignoring its very existence. It could also be that this deficiency is not mere oversight but aims to
emphasize the supremacy of the European accounting system.
A first interpretation of the non endorsement of the framework, or presumed oversight of it can be
directly linked to the fact that the framework is not qualified as a standard and consequently the EU
has not found it necessary to proceed to its endorsement. Subsequently, the conceptual principles
could be left out of a legal system as in the view of the IASB they are not seen to represent a
binding clause for those who are obliged to apply the system of International principles.
Despite some uncertainty on the stated status of the framework, its address value, within the
IASs/IFRSs system, is undeniable considering the number of explicit references in the accounting
standards texts. These references to the conceptual framework serve in orienting the interpretative
and integrative evaluation in solving cases of departure from standards or cases of deficiencies into
standards, and so adopting the standards the EU adopted the framework.
A further consideration could be formulated to support the importance of the framework in the
European regulation. The recognition of the conceptual framework by the regulation could be
inferred by the same criteria established for the evaluation process of IASs/IFRSs to get the
endorsement in Europe. In these criteria the European legislator imported, adopting precisely the
12
Other examples comprise the FSB’s incorporation of international auditing standards, the Basel Committee’s
reference to credit rating agencies and the WTO agreements’ connection with international standards established by
private bodies.
13
A part from some problems related to financial instruments accounting standards.
same words, the objective of financial report and the qualitative characteristics of financial
information as they are stated into the IASB framework. The substantial inclusion of the
framework’s concepts into article 3 of the European regulation involves an indirect acceptance of it
as standards are endorsed because respondent to the conceptual requirements of the conceptual
framework. This is a way capable of inserting an external conceptual structure into a legal
accounting system. The same external frame at the same time stays at the origin of the European
accounting standards, as the endorsed IASs/IFRSs could be named.
The requirement, among the evaluation criteria, of the conformity with the fundamental European
principle of the true and fair view and to the European public interest represents a clear signal of the
will to affirm the European model supremacy. However a whole coherence in the hybridization of
the European regulation, and so its validity, could not be reached without considering, although
indirectly, the framework. To reinforce the position it is worth to consider the Observations of the
European Commission to the Regulation 1606/2002, dated November 2003, where the importance
of the framework is made clear and the same framework, as an annex to the document, is made
concretely available in all European languages.
Concluding one can affirm that the framework, although it does not belong to the set of accounting
standards officially endorsed by the EU and so “legalized”, it does not represent an external body in
the European accounting regulation because of its implicit, or indirect, but significant presence into
the accounting system with its integrative, interpretative and appraisal role through the same
IAS/IFRS endorsed in Europe.
The 2010 modifications to the IASB framework do not help the European recognition, although
implicit, of it because some changes have affected concepts, like reliability, that are part of the
endorsement criteria. A better redefinition of the conceptual framework, and of its authority, will
surely promote the European adoption of it.
6. Conclusion
At present the IASB does not clearly state the Conceptual Framework authority and it can not be
inferred only through interpretation both within the International accounting system and the EU
legal system looking for elements pro and cons the assertion of its status. The opportunity of the
new perspective of the framework revision is no longer limited to the convergence of frameworks
now dated, but opens to a profound rethinking that meets the current financial information needs. In
this view there is a call for a clear and indisputable definition of the conceptual framework authority
in order to make effective its enforcement.
References
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