On July 12, 2024, the FASB issued the final chapter of its Conceptual Framework, finishing a process that has spanned decades. The Conceptual Framework does not establish authoritative guidance. In fact, all references to the Conceptual Framework were removed from the Codification in ASU 2024-02. That said, the Conceptual Framework is a foundational part of the standard-setting process.
As you can read on the Concepts Statement section of the FASB’s webpage:
“The FASB Concepts Statements are intended to serve the public interest by setting the objectives, qualitative characteristics, and other concepts that guide selection of economic phenomena to be recognized and measured for financial reporting and their display in financial statements or related means of communicating information to those who are interested. Concepts Statements guide the Board in developing sound accounting principles and provide the Board and its constituents with an understanding of the appropriate content and inherent limitations of financial reporting.”
In this August 12, 2024, Statement, SEC Chief Accountant Dr. Paul Munter emphasized the importance of the Conceptual Framework in assuring that standard setting serves the public interest. In the Statement Dr. Munter notes:
“Now that the updates to the Conceptual Framework are complete, it is important that the Board use it to guide its agenda-setting process and standard-setting deliberations, including to assist Board members in asking the right questions and objectively evaluating whether their views are consistent with the principles laid out in the Conceptual Framework.”
The Statement concludes with an emphasis on who the standard-setting process should serve:
“With the Conceptual Framework complete, the FASB’s focus on the guiding principles described in the Conceptual Framework can help it continue to develop high-quality accounting standards coupled with robust disclosures to best serve the needs of investors and protect the public interest.”
As always, your thoughts and comments are welcome.