A 2013 study “analyzes how the International Accounting
Standards Board (IASB) promotes professional judgment by issuing
objectives-oriented accounting standards and exposure drafts.” The focus is on
the role of judgment as outlined in Phase I of the IASB 2010 Conceptual Framework, Chapter 1 - Objective
of General Purpose Financial Statements and Chapter 3 - Qualitative
Characteristics of Useful Financial Information.
This research discusses how the Conceptual Framework, through objectives-oriented accounting standards, encourages professional judgment as recommended by the United States Securities and Exchange Commission (SEC) in its 2003 Report, Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System.
The research findings indicate that the five IFRS issued after the 2010 Conceptual Framework are objectives-based, but the eight issued before then are not.. Specifically, the objectives-based IFRS clearly stated the objective, they are based on the Framework without significant exceptions and bright-lines and they provide adequate application guidance. More significantly, a framework for judgment is provided.
The study concludes that: An increasingly complex financial environment demands accounting standards that narrow the range of professional judgments in accounting decisions. Although new accounting principles and approaches do not eliminate the necessity of judgments entirely, the IASB's process of improving transparency and comparability of financial reporting hinges on its ability to promote professional judgment. It depends on the standard setter and the practitioners. The IASB is issuing more objectives-based standards that provide a framework for judgment. Professional accountants, auditors and managers need to be cognizant of the IASB's efforts so they can cooperate in the pursuit to judgment.
The research paper is available online at International Journal of Business and Social Research (Vol 3, No 7 (2013). For more information, refer to The International Accounting Standards Board’s Progress in Promoting Judgement through Objectives-Oriented Accounting Standards by Tanja Lakovic and Jayne Fuglister, Faculty of Economics, University of Montenegro.
This research discusses how the Conceptual Framework, through objectives-oriented accounting standards, encourages professional judgment as recommended by the United States Securities and Exchange Commission (SEC) in its 2003 Report, Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System.
The research findings indicate that the five IFRS issued after the 2010 Conceptual Framework are objectives-based, but the eight issued before then are not.. Specifically, the objectives-based IFRS clearly stated the objective, they are based on the Framework without significant exceptions and bright-lines and they provide adequate application guidance. More significantly, a framework for judgment is provided.
The study concludes that: An increasingly complex financial environment demands accounting standards that narrow the range of professional judgments in accounting decisions. Although new accounting principles and approaches do not eliminate the necessity of judgments entirely, the IASB's process of improving transparency and comparability of financial reporting hinges on its ability to promote professional judgment. It depends on the standard setter and the practitioners. The IASB is issuing more objectives-based standards that provide a framework for judgment. Professional accountants, auditors and managers need to be cognizant of the IASB's efforts so they can cooperate in the pursuit to judgment.
The research paper is available online at International Journal of Business and Social Research (Vol 3, No 7 (2013). For more information, refer to The International Accounting Standards Board’s Progress in Promoting Judgement through Objectives-Oriented Accounting Standards by Tanja Lakovic and Jayne Fuglister, Faculty of Economics, University of Montenegro.
