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FRC asks IASB to strengthen financial reporting concepts of prudence and stewardship

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24th Jul 2015
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The Financial Reporting Council has said that a draft conceptual framework  for financial reporting developed by the International Accounting Standards Board (IASB) should give more detail about stewardship and prudence.

The UK regulator for accounting and corporate governance said that the IASB onceptual framework should recognise that investors need to rely on the financial statements to take an active part in corporate governance.

“It is often the case that investors will not or cannot sell their shares and therefore need information that enables them to assess the success of management’s current strategies and to consider possible alternatives,” the FRC said.

“To secure this, the conceptual framework should either identify the provision of information on stewardship as a primary objective of financial reporting or expand its discussion of the issue.”

The FRC also recommended that the idea of prudence in the conceptual framework should include ‘asymmetric prudence’ - the recognition of losses and liabilities at a lower level of likelihood (and hence often earlier) than gains and assets.

In June, the Institute of Chartered Accountants in England and Wales told the IASB to broaden its conceptual framework for financial reporting.

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