Q.2-11FRS - Intermediate Accounting (Kieso)

Question

Question: What two assumptions are central to the IASB conceptual framework?

Step-by-Step Solution

Answer

Answer 

Accrual basis and going concern are the two assumptions.

Step 1: Meaning of IASB

The IASB stands for International Accounting Standards Board. It is an independent body set up under the International Financial Reporting Standards (IFRS) Foundation and is involved in the standard-setting process.

 

Step 2: The two assumptions underlying the conceptual framework of IASB are:

Accrual basis of accounting: The accrual concept of accounting means that a transaction should be recorded when it is entered into and not when the actual settlement takes place. For e.g., interest income earned in 2021 but received in 2022 should be recorded in the books of accounts in the financial year 2021. 

Going concern assumption: Going concern means that an entity is formed to continue its business for the foreseeable future and will not cease its operations. Because of this assumption, the fixed assets are depreciated over the periods instead of being expensed off in the year of acquisition.