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Why the emphasis on 'useful in making economic decisions'?
One reason, which many standard setters and academics will no doubt dispute, for the emphasis on accounting statements being particularly focused on being useful in making economic decisions arises from the explosive growth in higher education in many countries. From the 1960s onwards, new subjects were needed for the new universities - in the United Kingdom, the United States, Australia and elsewhere. There were few professors, doctors etc of accounting. Accounting and bookkeeping were subjects for 'Nite' school. So - enter the economists or those of such a mind. Some would say that economics is a black art - 'the dismal science' (well, Thomas Carlyle thought that). Academic rig our and depth were brought to a basic skill and accounting has never looked back! No matter the rationale for the declared objectives in the Framework, it is very important if you wish to comprehend the mindset of the standard setters as it manifests itself in the Framework and the definitions which pervade the IFRSs.
A barrier to understanding accounting concepts and rules is that the standard setters, for reasons that are not clear (maybe they wish to make accounting more 'arty' and deep than it will ever be), like to use words in new ways, often as apparent synonyms. Recent examples from the FASB and IASB are: notion, depict, phenomena, dismantlement, understandability.
It would be good to refer to a single succinct and comprehendible source of standard fundamental accounting concepts and rules, but no such thing exists. The nearest we have is the 'Framework' as developed by the FASB and IASB and to be found in an abridged form in the latest UK GAAP FRS 102, Section 2, titled 'Concepts and Pervasive Principles'.
The framework continues to be developed and is not perfect. It is the dream of many standard setters, of an economist's mindset, to have a framework with suitably worded definitions on which they could anchor all their thoughts. This dream seems to be rather elusive, possibly because some of the terms and definitions they themselves have come up with are either too obvious or too vague - some examples are shown below.
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