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ACCA Strategic Professional · Strategic Business Reporting (International) · Discussion of issues in financial reporting

Tarn Co's accountant has to apply an IFRS Standard to a transaction for which no Standard specifically applies. Under IAS 8, what role does the Conceptual Framework play?

Where no Standard applies, management uses judgement under IAS 8, looking first to Standards on similar matters and then to the Conceptual Framework's definitions, recognition criteria and measurement concepts. The Framework does not override a Standard, and treatments cannot be freely chosen merely with disclosure.

  1. AManagement must use judgement and consider the definitions, recognition criteria and measurement concepts in the Framework, after considering related StandardsCorrect
  2. BThe Framework overrides any IFRS Standard where it gives a better outcome
  3. CThe Framework is ignored and local GAAP is applied automatically
  4. DManagement may choose any treatment provided it is disclosed

Explanation

IAS 8 requires management to use judgement to develop a policy giving relevant and reliable information, referring first to Standards dealing with similar issues and then to the Framework's definitions and criteria. The Framework never overrides a Standard. Free choice or automatic local GAAP is not permitted.

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