Coherent financial reporting framework


  • Transparency: full disclosure and fair presentation and reveal economics of the company
  • Comprehensiveness: should include all kinds of transactions including new types 
  • Consistency:  Similar transactions should be accounted for in similar ways

Barriers to creating coherent financial reporting framworking 

  • Valuation: Measurement bases for valuation that require little judgment may be less relevant than a basis like fair value that require more judgment
  • Standard setting: Three approaches
    • Principle-based approach: relies on broad framework (IFRS)
    • Rules-based approach:Specific guidance on how to classify transactions (US GAAP)
    • Objectives-oriented: Combination of the two approaches
  • Measurement: trade off between
    • Valuing the elements at one point in time (Balance sheet)
      • Asset/liability approach: 
    • Value the changes between points in time (income statement)
      • Revenue/expense approach