Conceptual Framework Coherence: Why And How

Abstract

This paper proposes a basis for progress in the development of a conceptual framework as a basis for regulating GPFR. The broad socio-economic environment is explored to determine the primary purpose of GPFR and its regulation and, from this, to establish the high-level properties of a conceptual framework suitable for that purpose. Amongst the conclusions reached are that the coherence of the conceptual framework is a prerequisite for GPFR development. Coherence offers terseness in the conceptual framework and, thereby, the ability to arbitrate competing claims on GPFR. Identification of the primary purpose of GPFR and its regulation leads necessarily to adopting a specific view of the users, objectives, and qualities of GPFR. This specificity is not arbitrary but, instead, prioritizes satisfaction of the central drivers of conceptual framework development rather than every possible purpose of every possible claimant. The satisfaction of every GPFR user can only ever be incomplete and, thus, the general purpose of financial reporting would not be achieved by adopting a stakeholder theoretical view of the purpose of regulating GPFR. Consistent with the purposive approach we conclude in favour of the investor primacy principle, the proprietorship view of accounting, and the current value variant, fair value.