Conceptual Framework

The purpose of the conceptual framework for financial reporting is to set out the concepts that underlie the preparation and presentation of financial statements. The introduction to the conceptual framework states that accounting statements are most commonly prepared in accordance with an accounting model based on recoverable historical cost and the nominal financial capital maintenance concept. The qualitative characteristics identify the information that is most useful in financial reporting. The conceptual framework is used by international accounting standards board (IASB) members and staff in their debate, and they expect that those commenting on Exposure Drafts articulate their arguments in terms of the conceptual framework. Management commentary is based on the principles of providing management's view and supplementing and complementing information presented in the financial statements. The financial accounting standards board (FASB) does have an active project on the definition of a non‐public entity.