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ACCA Strategic Professional · Strategic Business Reporting (International) · The applications, strengths and weaknesses of the accounting framework

Which of the following is a recognised weakness of the Conceptual Framework's treatment of performance reporting?

A recognised weakness is that the Framework gives no clear principle on when items belong in other comprehensive income rather than profit or loss, and recycling is not clearly addressed, leaving these decisions to individual Standards.

  1. AThe Framework requires all income and expenses to be reported in other comprehensive income
  2. BThe Framework prohibits the use of other comprehensive income
  3. CThe Framework contains no requirement to report profit or loss at all
  4. DThe Framework does not define when income and expenses must be reported in OCI rather than profit or loss, leaving the Board to decide in individual Standards, and recycling is not clearly specifiedCorrect

Explanation

The 2018 Framework states that profit or loss is the primary source of information on performance and presumes all income and expenses go there, but allows the Board to require OCI in exceptional cases to enhance relevance. It gives no principle for OCI use or a clear stance on recycling, which is a criticised gap. The other options misstate the Framework.

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