An Evolution of Form and Content: A Practical Guide to Use of the FASB's Conceptual Framework

Abstract

Equations are only as reliable as we make them. This is true in all disciplines, including accounting. They are forms accommodating content. So, if the balance sheet (A = L OE) and the income statement (R – E = I) equations, for example, structure imprecise business conditions and operations, accountants try to improve their use, not ignore or discard them. The same is true of conceptual frameworks. They are as subject to error or misuse as the balance sheet and income statement equations. Consequently, the accounting profession is not willing to give up on conceptual frameworks, either. Although conceptual frameworks have not been in use as long as, and do not have the same degree of acceptance or understanding as, the income statement and balance sheet, they, too, can be structured to be as useful as the accounting equations. To accomplish this, a conceptual framework’s form is distinguished from its content, similar to distinguishing the form of the balance sheet, A = L OE, from its content. The form and content are then applied to an accounting transaction to demonstrate how to rigorously apply a conceptual framework.