Submission from
Olga Solovyeva
Associate Professor
Accounting Department
Economic Faculty
Moscow State University
RUSSIA
e-mail: soloveva@econ.msu.ru
ovsoloveva@yahoo.com
Date: September 24, 2008
IASB
To whom it may concern
Please find below my comments on ED “An Improved Conceptual Framework”.
Sincerely yours,
Olga Solovyeva
COMMENTS ON
Exposure Draft
AN IMPROVED CONCEPTUAL FRAMEWORK FOR FINANCIAL
REPORTING: Chapter 1 & Chapter 2.
Welcoming in general the attempt of the Board to choose one accounting theory as a basis for
developing the Framework, its worth to mention that the entity theory/entity perspective (the one
that was chosen) supposes among other things:
1. Accounting equation as: Assets = Equities, so no distinction between liabilities and
equity;
2. Main focus on Income Statement;
3. Stewardship is of primary significance;
4. Treatment of interests and dividends as the same category – distribution of profit;
5. Preference to a physical capital concept.
(more details can be found, for example, in:
J. Godfrey, A. Hodgson, S. Holms, A. Tarca Accounting Theory. – 6th ed., John Wiley & Sons
Australia, Ltd, 2006, pages 102-107;
A. Riahi-Belkaoui Accounting Theory. – 5th ed., Thomson Learning, 2004, pages 215-216)
Does it what the Board is really would like to have?
For me it neither corresponds to existing Framework, nor to the trends of changes in the
Standards (for example, the Statement of Comprehensive Income is clearly based on financial
capital concept).
In addition I would still like to express concern about exemption of reliability and prudence from
the qualitative characteristics. It gives the way to full fair value accounting which is highly
debatable.
Indirect verification also seems discussable.
Paragraph QC21 states: “With indirect verification, the amount or other representation is verified
by checking the inputs and recalculating the outputs using the same accounting convention or
methodology.”
According to this, you can formally check the input and confirm that it was the same as
management used, confirm that the method was the same as the management used, so the final
figure is correctly calculated and can be treated as verified. BUT: what if the assumptions and
estimates for that input were not prudent, or not all important factors included in the estimate?
The figure is verified but not the proper one.
I think the concept of verification needs to be further developed.