The stately dance continues

The IASB and FASB have today published the definitive (for the moment) chapters of their joint conceptual framework for financial reporting. The project, which is supposed to lead to 'internally consistent' standards is already so riddled with contradictions that it has little credibility. However, the long extended search for a framework allows the standard setters to defer awkward questions almost indefinitely.

The latest twist [1] is the assertion that the purpose of financial statements is to

'To provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.'

The irony of this is that most equity investors never provide any financial resources to an entity. They buy and sell second-hand shares. When new resources are supplied to an entity, more information, by way of prospectuses and so on, is created that supplements financial statements.


[1] Well I assume the final document includes this phrase. At the time of writing I'm relying on a previous document as I don't have access to the actual document; it is not freely available - one has to pay for a subscription to get it.