Financial Accounting Theory and Analysis, 15th Edition

2The Pursuit of the Conceptual Framework

The Conceptual Framework (CF) is a body of interrelated objectives and fundamentals that is contained in the various FASB Statements of Financial Accounting Concepts (SFACs). It represents an attempt by the Financial Accounting Standards Board (FASB) to develop concepts useful in guiding the Board in establishing standards and in providing a frame of reference for resolving accounting issues. Chapter 1 summarized the development of accounting from its initial stages until the present. This review revealed that accounting practices were initially developed in response to changing economic conditions, and that no attempts were made to establish a “theory of accounting” prior to the twentieth century. Subsequently, individual writers and authoritative bodies undertook efforts to explain the goals of accounting. Most of these initial approaches were more descriptive of existing practice than normative in nature. Later efforts have attempted to develop and build on a normative theory of accounting. The evolution of these efforts into the FASB's CF is outlined in the following sections.

The Early Theorists

Although debates about issues such as the existence of a science of accounting and the need to develop a theoretical framework began to appear in the early 1900s,¹ the first attempts to develop accounting theory in the United States have been attributed to William A. Paton and John B. Canning.² Paton's work, based on his doctoral dissertation, ...