Answer
A conceptual framework is a lucid arrangement of interrelated goals and fundamentals that can lead to consistent standards and that prescribes the limits, nature, and function of financial statements and financial accounting. A conceptual framework is essential in financial accounting because:
1. It will upgrade comparability among organizations' financial statements.
2. It will enable the Financial Accounting Standards Board (FASB) to issue more helpful and steady standards later on.
3. It will significantly increase the number of financial statements users comprehension of and trust in financial reporting.
4. New issues will be all the more rapidly soluble by reference to a current framework or system of fundamental theory.
Work Step by Step
It is vital to also understand that Framework Document itself is definitely not a standard – its basic role is to help the board in developing new or updated accounting standards and to help preparers of financial statements in handling issues that are not secured by accounting standards.
