Answer
(a)
Work Step by Step
(a) It is used when there is no standard or interpretation related to the reporting issues under consideration.
While evaluating a financial accounting or reporting issue for setting up a standard or rule FASB must ensure that one standard remains consistent with previously set standards based on similar issues. This can only be done if the clarity of the basic concepts of financial reporting and procedures are not affected by individual presumptions but rather is based on a well thought out and established framework of concepts. Conceptual framework, therefore, is described as the logical, reasonable and consistent system of objectives and fundamentals which are necessary for ensuring the reliability and consistency of financial standards.
Therefore in case of an issue under consideration for which there is no standard or interpretation available, Conceptual Framework gains authoritative status.
