Using the FASB's Conceptual Framework: Fitting the Pieces Together

The American Accounting Association's Committee on External Reporting presents a 4-tier model to represent the conceptual process involved in the selection of accounting concepts and procedures. The model consists of: 1. variables and relationships, 2. object or activity inputs, 3. attributes, and 4. measurement procedures. The Financial Accounting Standards Board (FASB) has adopted a conceptual framework that, in conjunction with existing accounting standards, considers each of the 4 tiers as well as the logical connections between tiers. This framework is set forth in the FASB's Statements of Financial Accounting Concepts concerning the objectives of financial reporting by business and nonbusiness entities, and qualitative characteristics of accounting information, and the elements of, and recognition and measurement in, financial statements. Based on the model presented, the FASB's conceptual framework seems to be relatively complete and usable in practice.