Irreconcilable differences? The FASB's conceptual framework and the public interest

Abstract

Recently, the Financial Accounting Standards Board (FASB) revised its 'conceptual framework'. The FASB's conceptual framework is "intended to serve the public interest by providing structure and direction to financial accounting and reporting to facilitate the provision of unbiased financial and related information [which] helps capital and other markets to function efficiently in allocating scarce resources in the economy and society" (emphasis added). However, it is not the mission of either the Financial Accounting Foundation (FAF, the parent of the FASB), or the FASB to serve the public interest. Therefore, whether the FASB's conceptual framework can serve the public interest as intended, or whether the conceptual framework is reconcilable with the public interest is questionable. This paper explores the question of whether the conceptual framework is compatible with the public interest. The question is important to consider because if the conceptual framework cannot serve the public interest as intended, then it will be necessary to revise the conceptual framework in order to achieve its intended purpose of serving the public interest.