How Conceptual Framework And Its Theoretical Structure Provides Information To Management, Creditors And Banks

Mergers and Acquisitions

This paper explains the manner in which conceptual framework and its theoretical structure provides the best information to management, creditors and banks so that these stakeholders can make the best informed decisions in growing the company, granting credit and extending financing to a business respectively. The conceptual framework is a modern terminology in the accounting literature. According to Weil and Schipper (2012), many setters of accounting standards have, for a long time, operated without consideration of a conceptual framework. This naturally resulted into haphazard accounting standards that could not be proactive, but reactive to the issues of the day.

Conceptual framework and its theoretical structure, generally, organizes the concepts and premises that are fundamental to corporate accounting, especially financial accounting. It is useful to management through provision of a better comprehension and foreseeability in the interpretation of accounting standards. It should, also, be clear that the conceptual framework and its theoretical structure provides the best information to management, creditors and banks through bolstering interpretation of financial information and making it relevant to the highlighted situations of decision making (Weil & Schipper, 2012). In the context of investment; for instance, it ensures that the information provided has information value. Such information plays a great role of improving predictions and behavior of investors. Through financial reporting, the conceptual framework and its theoretical structure provides financial information regarding the reporting entity that has usefulness to both the existing and potential investors, creditors and other lenders in making decision regarding provision of resources to the entity. Theoretically, the conceptual framework has the responsibility of driving the development of the standards of accounting.

In conclusion, conceptual framework and its theoretical structure, generally, organizes the concepts and premises that are fundamental to corporate accounting, especially financial accounting. It, also, structure provides the best information to management, creditors and banks through bolstering interpretation of financial information and making it relevant to the highlighted situations of decision making.


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