Explain what a conceptual framework is and the advantages of having such a framework?

A conceptual framework is a statement of theoretical principles that provides guidance for financial accounting and reporting.

Advantages of conceptual framework:

1. The main advantage of a conceptual framework is that it clarifies the conceptual underpinnings of accounting standards and allows standard setters to develop accounting standards on a consistent basis.
2. It also assists preparers, auditors and users of financial statements to understand the approach to standard setting, and the nature and function of the financial information reported.